* Eni board discussed breakup plan in January -sources
* Plan on hold due to board renewal in May -sources
* Plan envisaged sale of drilling business -sources
* Drilling segment valued at around 4.5 bln euros -analyst
MILAN/LONDON, March 14 (Reuters) - For Italy's Eni and its Saipem unit, breaking up is proving hard to do.
The oil major has looked at spinning off and selling the oil drilling business of its troubled subsidiary to put it on a standalone footing and attract a new investor, three sources with direct knowledge of the matter told Reuters.
Plans to sell the asset, given an enterprise value by Banca Akros analysts of around 4.5 billion euros ($6.27 billion), have been brewing since last summer and were discussed by the board in January.
But they are now on hold because of the scheduled renewal of Eni's board at a shareholder meeting in late May that could spell the end of a nine-year term at the head of Italy's oil major for CEO Paolo Scaroni, the sources said.
"Breakup plans through the sale of drilling assets were in place in January but were blocked by the Eni board because it's not clear what will happen to the CEO," one of the sources said.
Saipem, 43-percent-owned by Eni, became a liability for the oil group last year when half its market value was wiped out by two profit warnings and a probe into alleged corruption in Algeria which also engulfed Scaroni.
Scaroni and Saipem have repeatedly denied any wrongdoing.
Saipem, some of whose former managers are under investigation in the corruption probe, was forced to slash its outlook because of lower-than-expected margins on some major existing contracts.
These managers have also denied any wrongdoing.
Eni, Italy's biggest listed company, carries all Saipem's debt though it is not involved in its day-to-day running. A failure to get a deal would mean Eni will find it harder to cut Saipem's debt and get the group onto a standalone footing.
An industry ministry source and sector insiders say the new centre-left government of Prime Minister Matteo Renzi might opt for change when Scaroni's office comes up for renewal in May. The executive has said he is prepared to do a fourth term.
The onshore and offshore drilling business, less exposed to Saipem's recent troubles, accounts for 15 percent of revenue. The company, with a market value of 7.6 billion euros, also operates in oil and gas engineering and construction projects.
A breakup would allow Saipem to cut its 4.7 billion euro debt pile, putting it in better stead with ratings agencies.
Meanwhile Eni, which now gets lower dividends from its subsidiary, would be able to distance itself from a weakened asset, solving what some analysts see as a long-standing conflict of interest as Eni accounts for about 10 percent of Saipem's overall order book.
"The drilling business is a steady cash generator which means it can be loaded with debt leaving a slim low-debt E&C business that could be ideal for a partner," the source said.
A current oversupply of ships means that drillers who rent out their fleets on a short-term basis with prices linked to spot fees are being punished.
"Saipem is less affected since its (drilling) contracts are 4-5 years which means the business is more stable," oil analyst Andrea Scauri at Mediobanca said.
Press reports in January said Norway's Seadrill was interested in buying Saipem's offshore drilling business while Subsea 7 was interested in a stake in Saipem.
Eni and Saipem declined to comment on the breakup plan.
OWN RATING
Saipem has the luxury of being able to hide behind a well funded Eni, whose A credit rating is above Italy's own rating.
People close to the matter said state-controlled Eni wants Saipem out from under its wing with a rating of its own but it needs to see its stock bolstered by new orders or asset sales.
Scaroni, who has been streamlining Eni by selling non-core businesses and focusing on oil exploration, has said the major might be prepared to sell down its stake in Saipem.
A second source familiar with the matter said Eni had been actively reviewing options, including a breakup, last summer with the help of Goldman Sachs.
"But it all went quiet because they didn't manage to find the right structure at the time," the source said.
Oil contractors have seen slimmer pickings in recent years as delays and overspending at mega projects such as Kashagan and the Australian liquefied natural gas schemes crimp sector funds.
Last year was peppered with profit warnings in the sector, with France's Technip and Norway's Aker Solutions and Subsea 7 joining Saipem.
A third banking source with knowledge of the matter said Saipem needed capital to be a standalone, adding a cash call was discussed last year but had been stopped after the group issued its second profit warning.