Divestment of Eni’s interest in Snam
On October 15, 2012, following the completion of certain conditions precedent, including, in particular, antitrust approval, Eni finalized the divestment to Cassa Depositi e Prestiti SpA (“CDP”), an entity controlled by the Italian Ministry of Economy and Finance, of 1,013,619,522 ordinary shares of Snam SpA, corresponding to 30% less 1 share of the voting shares at a price of €3.47 a share, as provided for by the sale and purchase contract of June 15, 2012. The gain on the disposal of this interest amounting to €2.02 billion was accounted in the profit and loss.
The total consideration of €3,517 million has been paid for 75% at the balance sheet date. The balance of €879 million has been paid in February 2013. The exclusion of Snam from consolidation effective form the fourth quarter 2012 allowed to reduce financial debt by €12.45 billion. Prior to the divestment, Snam had already reimbursed intercompany loans via third-party financing.
The transaction implements the provisions of Law No. 27/2012, pursuant to which Eni was mandated to divest its shareholding in Snam in accordance with the model of ownership unbundling as per Legislative Decree No. 93/2011, and in accordance with the criteria, terms and conditions defined in the Decree of the President of the Council of Ministers issued on May 25, 2012 (the “DPCM”) and designed to ensure the complete independence of Snam from the largest gas production and sale company in Italy.
Furthermore, the DPCM provided the divestment of the residual shareholding of Eni in Snam through transparent and non-discriminatory sales procedures targeted to both retail and institutional investors. On July 18, 2012, Eni finalized the sale of a further 5% interest in Snam (178,559,406 ordinary shares). The total consideration amounted to €612.5 million, corresponding to €3.43 per share. The deal was carried out through an accelerated book-building procedure aimed at Italian and foreign institutional investors.
Including the sale of the above mentioned 5% interest made to institutional investors in July, after the transaction with CDP the residual interest of Eni in Snam is equal to 20.2% at the balance sheet date. This interest was classified as a financial instrument and measured at fair value corresponding to market prices which brought profit a revaluation gain of €1,451 million at the price current at the transaction date of €3.5 a share with future changes in fair value recognized in equity, except for those shares which are underlying a convertible bond. In January 2013, Eni finalized the divestment of part of its interest in Snam with the placement of €1,250 million aggregate principal amount of senior, unsecured bonds, exchangeable into ordinary shares of Snam. The bonds have maturity of 3 years and pay a coupon of 0.625% per annum. The bonds will be exchangeable into Snam ordinary shares at an exchange price of €4.33 per Snam ordinary share, representing approximately a 20% premium to the Snam current reference price. Underlying the Bonds are approximately 288.7 million ordinary shares of Snam, corresponding to approximately 8.54% of the currently outstanding share capital of Snam. Changes in fair value of those shares were reported through profit as opposed to equity based on the fair value option provided by IAS 39 from inception, i.e. the transaction date with CDP. Those changes were immaterial at the balance sheet date. In case the strike price is not reached, Eni retains the option at the expiration of bonds to reimburse bondholders with the underlying Snam shares at the market price current at the reimbursement date.
Following these transactions, Eni’s residual stake in Snam at the balance sheet date amounted to 20.2% of the total capital equal to 683.9 million shares booked at fair value for €2,408 million determined at a price of €3.52 per share.
At the date of the closing of the transaction, the counterparty CDP holds a stake in Eni that allows for a significant influence on the latter and is subject, with Eni, to the MEF’s common control. Consequently, the transaction qualifies as material transaction with related parties, as the value of the transaction is above certain established thresholds applicable to sale transactions pursuant to the Consob Regulation (No. 17221 of March 12, 2010 as updated by Reg. 17389 of June 23, 2010) and the internal procedures adopted by the Company 1.
A full review of transaction is disclosed in the Information Statement, published on June 6, 2012 (and available at the Eni website eni.com) in application of the Consob Regulation No. 11971 of May 14, 1999 and later additions and modifications (for further information see the paragraph “Transactions with related parties” in the “Other information” section).
Divestment of Eni’s interest in Galp
On July 20, 2012, as part of the agreements signed on March 29, 2012 by Eni and the other relevant shareholders of the Portuguese company Galp Energia, Amorim Energia and Caixa Geral de Depòsitos SA, Eni sold a 5% interest in Galp to Amorim Energia. The transaction covered 41.5 million shares at the price of €14.25 per share, for a total consideration of €582 million and a capital gain registered in profit of €288 million. Following the sale Eni ceased to be part of the existing shareholders’ agreement governing the investee and Eni’s residual interest in Galp Energia of 28.34% was stated as a financial instrument measured at fair value represented by the market price of Galp which resulted in gain of €865 million at the price current at the transaction date of €10.78 a share with future changes in fair value recognized in equity, except for the Galp shares which are underlying convertible bonds.
As part of the March agreement, Eni has the right to sell up to 18% of Galp shares on the market (which could potentially increase by 2% if convertible bonds are issued) and a pre-emption right is granted to Amorim on the residual 10.34% shares of Galp owned by Eni through a combination of a call option on a 5% interest and a right of first refusal on the remaining 5.34%, or on the whole 10.34% in case Amorim does not exercise the call option.
On November 27, 2012, through an accelerated book-building procedure aimed at Italian and foreign institutional investors, Eni sold approximately 33.2 million shares of Galp Energia, corresponding to 4% of its share capital at the price of €11.48 per share for a total consideration of approximately €381 million and a gain of €23 milion recorded in profit. Concurrently with the Equity Offering, Eni has completed the placement of approximately €1,028 million aggregate principal amount of senior, unsecured bonds, exchangeable into ordinary Galp shares. The Bonds will have a maturity of 3 years and will pay a coupon of 0.25% per annum. The Bonds will be exchangeable into Galp ordinary shares at an exchange price of approximately €15.50 per share, representing a 35% premium to the Equity Offering placing price of €11.48 per share. Underlying the exchangeable bonds are approximately 66.3 million ordinary shares of Galp, corresponding to approximately 8% of the currently outstanding share capital of Galp. Changes in fair value of those shares were reported through profit as opposed to equity based on the fair value option provided by IAS 39 from inception, i.e. the transaction date with Amorim; considering the current price of Galp shares of €11.76 a share at period end, a revaluation gain of €65 million was recorded in profit which was partially offset by a negative change in the fair value of the call option embedded in the bonds amounting to €26 million. In case the strike price is not reached, Eni retains the option at the expiration of bonds to reimburse bondholders with the underlying Galp shares at the market price current at the reimbursement date. Following these transactions, Eni’s residual stake in Galp at the balance sheet date amounted to 24.34% of the total capital equal to 201.84 million shares booked at fair value for €2,374 million determined at a price of €11.76 per share.
As a consequence of the Exchangeable Bond Offering, as per the agreements signed on March 29, 2012, Amorim Energia has a right of first refusal of up to 3.34% or up to 8.34% respectively, depending on whether or not the call option will be executed.