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Friday, February 14, 2014
Bad Company: Honolulu Rail Car Supplier Ansaldo Breda May be Sold, Liquidated
By Andrew Walden @ 5:12 AM :: 5735 Views :: Rail

by Andrew Walden

Ansaldo Honolulu, responsible for $1.4 billion in constriction and future maintenance of all Honolulu Rail cars and the driverless signaling system which will control them, is a joint venture of Ansaldo STS and Ansaldo Breda.  HART's $5.36 billion rail system depends on Ansaldo Honolulu for existence--but the survival of Ansaldo's Italian parent company, Finmeccanica, depends on getting rid of Ansaldo Breda. 

That's the word from Alessandro Pansa, who became Finmeccanica CEO last year after his predecessor was thrown into jail.  Testifying before the Italian Chamber of Deputies February 10, Pansa explained:

Ansaldo Breda is "likely to jeopardize the future of Finmeccanica." ... Finmeccanica "can not do the restructuring" of Ansaldo Breda because "it is not economically and financially viable.  All the sacrifices made ... will be wasted on the performance of Ansaldo Breda.  The situation in which we find ourselves today does not allow you to ensure the survival, development and success to all companies in the group."  You do not run "the risk of having to think of more amputations or crushing the group 'if' the company is sold off.  In the long run, the current economic and financial situations are not compatible with a listed company on the market, every day is accountable to shareholders and lenders."

To prevent Breda from crushing Finmeccanica, Pansa is pursuing a sale of the very unprofitable rail car maker Ansaldo Breda by linking it with the profitable rail signal firm Ansaldo STS.  As Pansa explains, "We're not dismantling the Italian industrial system."

The Medi Telegraph, January 29, 2014, optimistically reports:

General Electric is accelerating purchase negotiations with Finmeccanica for the acquisition of Ansaldo STS and – surprisingly – Breda too. For the first time, the American firm has accepted the condition set out by the CEO Alessandro Pansa who has always insisted that both companies should be sold together. There seems to be no written offer yet, however General Electric confirmed its willingness to negotiate the purchase of the whole business, which is the jewel of STS railroads plus the Breda trains, the financially-critical side of Finmeccanica.... 

The news have not been confirmed nor denied at Piazza Montegrappa. There are still rumors that Hitachi Rail and Mitsubishi are in the race, but sources close to the deal insist that GE has a clear advantage....

This might sound like good news for Honolulu Rail, but Reuters, February 14, 2014 has more details which indicate the liquidation or splitting up of Ansaldo Breda remains part of the picture:

Daily la Repubblica reported on Friday that a plan, to be unveiled by the end of February, envisaged the spin-off of Ansaldo Breda's healthy assets. These would be transferred to a new company called InMove Italia together with a minority stake in Ansaldo STS.

InMove Italia would then be sold to state holding Cassa Depositi e Prestiti while what was left of Ansaldo Breda would turn into a "bad company" to be gradually liquidated....

"It would be positive for Finmeccanica as it would get rid at least in part of AnsaldoBreda while for STS it is not good news because the sale of a minority stake pushes forward the prospect of a buyout offer for the whole company."

After last year's jailing of Giuseppe Orsi, Finmeccanica's previous CEO, Honolulu Rail officials went through the motions of questioning Ansaldo's ability to fulfill its rail contract. 

A March 7, 2013 dog and pony show featuring a HART teleconference with Ansaldo STS officials is described in a Pacific Business News article:

Ansaldo STS is stronger than AnsaldoBreda, but there is no foreseeable risk with working with AnsaldoBreda, Ansaldo STS CFO Christian Andi said via teleconference from Italy.

Andi addressed HART board members’ concerns about the possibility of Finmeccanica selling its transportation companies to focus on defense and aerospace work.

Any new owner of Ansaldo would have to fulfill the contract....

That could be quite a trick if both Ansaldo STS and Ansaldo Breda are broken up and the remainder of Ansaldo Breda is liquidated.  But of course nobody from HART asked about that.  Instead: 

Grabauskas said “the companies we are working with have excellent reputations.”



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