Milan, Aug 20 - Italian food group Parmalat is in the spotlight for a takeover after a missed bid for Australia's Dairy Farmers left it with some 1 billion euros of cash and a market value of just 3 billion euros ($4.43 billion).
Press reports of possible interest from private equity firms and investment banks have pushed the stock higher in past weeks and Italy's market watchdog, Consob, is now monitoring price moves, a source at Consob said.
Since Aug. 7, when Parmalat dropped out of talks with Australian farmers' cooperative Murray Goulburn on a joint bid for Dairy Farmers, its shares have gained about 6 percent, against a 0.5 percent rise in Milan's S&P/MIB share index.
"It has a lot a cash and the dossier is definitely interesting," an investment banker said on condition of anonymity. "But banks are in difficult water and their involvement seems unlikely. A private equity firm may be more likely."
Parmalat declined to comment. The company nearly collapsed under 14 billion euros of debt in 2003, but it has since recovered and has garnered cash from settlements with former bankers it pursued over claims related to its near-collapse.
It returned to the stock market in 2005.
Its fragmented shareholder base and a free-float equal about 80 percent of the share capital would facilitate a takeover compared to most Italian companies, where shareholders are often tightly bound by pacts.
But the moment might not yet be ripe as credit market turmoil has hit banks' balance sheets and made it tougher for private equity firms to fund their deals.
Banking sources said though private equity funds were the most likely bidders, the size of Parmalat, Italy's biggest listed food group, limited the number of potential investors.
"I don't believe there is anything concrete right now in the private equity world concerning Parmalat," a source close to a U.S. private equity firm said.
MF newspaper this week quoted a report by broker VDM Capital which simulated a private equity buy of Parmalat with 30 percent equity and 70 percent debt.
In a scenario with about 2.7 billion euros in future legal settlements, VDM saw the price at about 2.45 euros, lowering it to 2.15 euros with no fresh funds from legal cases, MF said.
BANKS
Another report last week in MF said some investment banks were sounding out shareholders to see if there was any chance of mounting a takeover. The paper added that conflicts of interest diminished as its legal issues with banks were gradually resolved.
But a second investment banker was sceptical.
"Many banks have difficult relationships with (Parmalat's Chief Executive Enrico) Bondi and it is improbable that they should get involved," this banker said.
Parmalat still has pending lawsuits with banks Citigroup and Bank of America over their alleged role in its collapse.
Italian bank Intesa Sanpaolo, which has a 2.4 percent stake in Parmalat and 20 percent of rival dairy group Granarolo, has also been mentioned as a possible buyer. Intesa was not immediately available to comment.
By 1343 GMT, shares in Parmalat were 0.54 percent down to 1.8370 euros.
Bondi, the independent-minded chief executive, has said he will stay at Parmalat until 2010.
However, Italian media have linked Bondi, a turnaround expert, with the future of ailing carrier Alitalia, which the Italian government is trying to sell.
Business daily Il Sole 24 Ore said on Wednesday his position was safeguarded by corporate by-laws which required approvals from 95 percent of the shareholders for them to be changed.
"One could be in the embarrassing situation where one owns the majority of the shares but cannot pick the chief executive or the board," the paper said.
Parmalat will report first-half results next week, after saying at the end of July core profit fell 10.4 percent in January-to-June due to higher milk prices and rising costs.