MSC and Lufthansa take pole in ITA bidding process

The bidding partners, Mediterranean Shipping Company (MSC) and Lufthansa, have come a step closer to acquiring a major stake in Alitalia successor, ITA Airways. The duo’s bid offers better economic and strategic prospects for ITA compared to a tender submitted by U.S. investor Certares, the Italian Ministry of Economy concludes, following the evaluation of the two bids.

In its decision, the Ministry cites the two outcomes of the competing analyses submitted by advisors Equita and Gianni & Origoni. According to newspaper "Corriere della Sera", the recommendation of the Ministry will now be submitted to the government under Prime Minister Mario Draghi, which will then start negotiations with MSC and Lufthansa, provided Mr. Draghi and the governing body follow the suggestions of the advisors.

But that could be delayed because of the government crisis that has been simmering in Italy since last week. It was triggered by the departure of the Five Star Movement from the government coalition, followed by Mr. Draghi's offer to step back. Although President Sergio Mattarella has rejected Draghi's proposal to resign, the political crisis is far from over. 

For MSC and Lufthansa, this means they will have to wait until Rome's political controversies are settled and a functioning government is back in office. This also applies to their competitors in the bidding process: the of U.S. investment fund Certares, Air France-KLM, and Delta Air Lines. However, this trio’s offer is financially less attractive from the point of view of the Italian state, which still owns ITA (100%).

What counts is the business perspective
While MSC/Lufthansa value ITA at 800 – 850 million euros, their competitors Certares / AF-KLM / Delta are willing to pay around 500-600 million euros, down from the 600-800 million range standing in their proposal submitted on 23MAY22.
In addition to the purchase price, as the advisors made clear in their report, it is also and above all a question of the future strategy that should play a key role in the upcoming negotiations with MSC/Lufthansa, should the Draghi government follow their recommendation. Further top priorities that need to be clarified before a final decision is made by the state authorities for or against the preferred bidder, is their business plan for ITA, network, and synergy issues, the mid-term development plan, including employment, the role of line-haul, and leisure air services and – highly important – whether cargo has an important function in the business plans pursued by MSC/Lufthansa.

Rome as joint gateway
Besides this bundle of aspects, which now have to be clarified in the upcoming negotiations, another announcement made earlier by Lufthansa and MSC is likely to play an important role: Both have declared that they intend to concentrate traffic on Rome Fiumicino as a joint hub for ITA and the Lufthansa Group, thus using Fiumicino as their central Italian gateway, and not Milan-Malpensa in northern Italy.
From MSC's point of view, the deal is also interesting because it would allow the shipping company to add air transports to its service portfolio - as its competitors, Maersk or CMA CGM, have already done. Instead of inventing the wheel anew, MSC has joined forces with Lufthansa to have an experienced partner at its side. Against the background of the recent takeover of Bollore's African business by the Geneva-based box liner, air links to the most important economic centers on the continent would also be an important addition to maritime transport.
Should negotiations proceed as planned, the deal is expected to close in the fourth quarter of this year, writes Corriere della Sera. The final decision will be subject to the green light from the EU competition watchdogs.

Heiner Siegmund

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