(Bloomberg) -- Prime Minister Giuseppe Conte yielded to pressure from his populist coalition partner in a tussle with the Benetton-owned Autostrade per l’Italia SpA over highway concessions, testing his fractious administration.
The premier rejected a final offer from the Benettons in a dispute that has split two fractious Conte administrations since the deadly 2018 collapse of a Genoa bridge operated by toll-road manager Autostrade, owned by Atlantia SpA. Shares of Atlantia slumped in Milan.
The anti-establishment Five Star Movement, the largest force in Conte’s administration, has made the revocation a vital party platform since the bridge disaster, while the center-left Democratic Party has lobbied for a negotiated solution. Autostrade is 88% owned by Atlantia.
Conte hardened his stand against the Benettons after Five Star leaders over the weekend set the party’s demands at either revocation or a full exit of the family from Autostrade, according to a senior official who declined to be identified discussing confidential talks. Conte decided to side with Five Star, leaving it to the Democrats to work out how closely they want to align themselves with the Benettons, the official said.
“I’m not satisfied at all with the offer, which is embarrassing,” Conte, whose second coalition was sworn in in September, told newspaper Il Fatto Quotidiano. With the cabinet set to decide on the issue on Tuesday, Conte said he sees revoking the licenses as the only alternative to the Benettons fully exiting Autostrade.
If the prime minister does go for revocation, he faces trouble with junior coalition partner Italy Alive, led by ex-premier Matteo Renzi, which opposes the move. On Monday, Renzi lashed out at what he called populist slogans and said a revocation “would trigger a legal case worth billions that creates uncertainty, blocks construction sites, and means job losses.” He called for the state to get involved via a capital increase with lender Cassa Depositi e Prestiti SpA.
The Benetton family has always respected Italian institutions, both now and in the past when it was asked to invest in state-owned entities, people familiar with the billionaire family’s view said in response to Conte’s comments. The family was in talks last year to help rescue the Alitalia airline with investors led by the Treasury, and had invested in previous attempts.
Conte, a mediator figure who has no party membership, has come under fire in recent weeks with senior Five Star and Democrat lawmakers accusing him of failing to act fast enough on a range of issues from restarting an economy devastated by a coronavirus lockdown to the Autostrade issue.
Atlantia fell as much as 15% in Milan trading, the biggest intraday decline since March 16. Autostrade’s 750 million euros of bonds due 2026 fell 4 cents on the euro to 87 cents, the lowest level since late April, according to data compiled by Bloomberg.
Five Star’s Giancarlo Cancelleri, the deputy infrastructure minister, underscored the pressure on Conte. Asked if the issue could jeopardize the government’s future, Cancelleri told Corriere della Sera: “I don’t know. It’s certain that if we don’t bring home the revocation or the Benettons’ exit, it will be a big problem for us.”
The opposition Forza Italia of ex-premier Silvio Berlusconi could step in to support Conte in a parliamentary vote on the issue, Corriere said. The prime minister’s coalition has a razor-thin majority in the Senate.
Atlantia has said it may take legal action if the contract is revoked. It could also seek an immediate suspension in Italian courts. A judge could halt the process to decide on the merits of the case, kick-starting a judicial battle that could last years.
Under the Benetton proposal, the family would cede control of Autostrade to infrastructure fund F2i and Cassa Depositi, while retaining a minority stake, according to people familiar with the issue. The highway company would also reduce tariffs, boost investments and pay compensation for the bridge collapse, the people said.
Conte said the Benettons were making fun “of the families of the victims and all Italians. They haven’t yet understood, after many months, that this government won’t sacrifice the public good on the altar of their private interests.”
Autostrade sent the proposal to the government on Saturday. The government may have gained an edge in the negotiations after the country’s top court ruled against Autostrade in a case concerning its exclusion from works on a replacement bridge.
“It would really be paradoxical if the state went into business with the Benettons” because of “the serious failings accumulated by the management, which was chosen and backed by the Benettons in the years leading to the collapse and also since,” Conte said.
Atlantia has stuck to its guns. The company is ready to cede control of Autostrade but doesn’t want to exit the company completely, Chief Executive Officer Carlo Bertazzo told newspaper la Repubblica. Atlantia has admitted to past mistakes and now it wants to fix things, Bertazzo added.
A spokesman for Edizione Srl, the Benetton family holding company which controls Atlantia, declined to comment on Conte’s remarks about the family.
(Adds Benettons in seventh paragraph)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.