Eni and SK Capital Scrap Versalis Deal

Italian state-owned oil, gas and petrochemicals group Eni and US private equity company SK Capital have broken off talks over the sale of a majority stake in Eni’s chemicals and plastics subsidiary Versalis.

The talks were abandoned, Eni said, because the two sides could not reach agreement on “a series of issues,” including a forward strategy for Versalis. Eni will consolidate the chemical company in its group financial statement for the second half of 2016 after removing it from its books in the first half year in expectation of unloading a majority stake of around 70%.

Reports from Italy suggest that the strong national trade unions also played a role in ending the talks. The union Filctem-CGI, in a statement, applauding the break-off of talks, called it “an acknowledgement of the validity of the struggles of workers and trade union commitment to the preservation of the industrial role of Versalis and productive employment and heritage of this strategic reality for our economy.”

Reflecting promises made by Eni had to the national government in Rome, the potential investor said earlier this year it would keep the company alive in its current form for at least five years while maintaining current employment levels for at least three years and retaining the company’s Italian headquarters.

However, Filctem-CGI said SK Capital, as “a small American fund” headquartered in the Cayman Islands and the state of Delaware, “a true tax haven within the US,” was “absolutely unable to provide financial or industrial guarantees.” Shortly before the breakdown of talks was revealed, the unions had appealed to Italian Prime Minister Mstteo Renzi to intervene in the ongoing takeover talks; however, he declined.

Divesting Versalis, once known as Polimeri Europa, was part of an Eni plan to shed assets worth €7 billion over the next three years. The news agency Reuters quoted an unnamed company executive as saying the plan would go ahead despite the latest setback.