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July 27, 2017

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France to nationalize shipyard if Italy refuses offer

FRANCE said yesterday it would nationalize the STX France shipyard if Italy does not accept its offer to split STX’s capital equally, putting down a marker on the limits of economic liberalism under new President Emmanuel Macron.

The threat raises the stakes in a standoff with Rome over the shipyard’s fate, the only one in France with facilities big enough to build aircraft carriers.

Economy Minister Bruno Le Maire said nationalization would give the state more time to find a better shareholder deal, but even if temporary, it would mark the first major state intervention in the corporate world by Macron’s government which was elected on a pro-business platform.

Rome rejected on Tuesday the French proposal to split STX France’s ownership with Paris, saying it wanted the Italian state-owned Fincantieri shipbuilder to have a majority stake and control of the board, an Italian Treasury source said.

The company is being sold off following the collapse of South Korean parent STX, but Fincantieri’s bid has raised fears for French jobs at the Saint-Nazaire site on the Atlantic Coast, as well as for French interests.

Following the French government’s nationalization threat, Fincantieri Chief Executive Giuseppe Bono raised the possibility of walking away from STX France.

“We are Europeans and on STX we cannot accept being treated worse than the Koreans,” Fincantieri’s Bono said in a conference call.

Le Maire said Fincantieri was welcome to invest in STX but on an equal footing with French partners and said that the Italians had until today to decide about the offer on the table.

“If our Italian friends say ‘this deal does not work for us, we don't agree with 50/50,’ the state will exercise its pre-emption rights on STX,” Le Maire told franceinfo radio. “We will buy shares, we are majority owners and we will give ourselves time to negotiate a new shareholder pact.”

Under an existing pact, the French state has a pre-emption right to buy out shareholders that runs until the end of the month.

Le Maire said the cost of buying out STX’s other shareholders was “on a scale of tens of millions of euros rather than in the billions of euros.”

Macron was elected in May on promises to boost growth by lifting constraints on business and his government has since flagged plans to privatize non-strategic state holdings while easing labor regulations.

However, it has also not hesitated to lean on carmakers Renault and PSA Peugeot Citroen, in which the state owns stakes, to help a struggling parts maker in a region where jobs are scarce.

Macron has long said that the state can have a key role in the economy and still give entrepreneurs freedom to take risks in business ventures without fear of heavy-handed government interference.

Macron decided after his election to review the terms of a deal under his predecessor Francois Hollande to sell a large stake in STX France to Fincantieri.

“We are not happy with the deal negotiated by the previous government because it does not allow French shareholders to keep control of jobs, industrial capacities and regional development,” Le Maire said.


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