>>> Asian Update

Asia Mid-Session Market Update: China property prices edge up despite curbs; G20 communique retreats on pledge to fight protectionism

***Friday US markets on close: Dow +0.2%, S&P500 +0.3%, Nasdaq +0.4%***
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Utilities
- Biggest gainers: CTAS +4.7%; ADBE +3.8%; WYNN +3.8%
- Biggest losers: AMGN -6.4%; IVZ -4.4%; BEN -3.9%
- At the close: VIX 11.3 (+0.1pts); Treasuries: 2-yr 1.32% (flat), 10-yr 2.50% (-2bps), 30-yr 3.11% (-2bps)

***Politics***
- (DE) Pres Trump tweets about meeting with Germany Chancellor Merkel, says Germany "owes vast sums of money to NATO"
- (DE) German Defense Min von der Leyen: "There is no debit account in NATO" - press
- (US) House Speaker Ryan: Feel confident about health bill passing the House this week after changes made provided more assistance to people in their 50s and 60's - press
- (US) Pres Trump: Meetings on health care bill are going well; North Korea is "acting very badly" - speaking from Air Force One

***Weekend US/EU Corporate Headlines***
- MBLY: May seek higher offers from other companies - NY Post citing analyst
- SFM: Said to have held preliminary merger talks with Albertsons - press
- DDC: Confirms Washington Companies discloses all-cash proposal to acquire Dominion Diamond Corporation for $13.50/shr

***Key economic data:***
- (CN) CHINA FEB PROPERTY PRICES M/M: RISE IN 56 OUT OF 70 CITIES VS 45 PRIOR; Y/Y: RISE IN 67 OUT OF 70 CITIES V 66 PRIOR; China avg all-70 new home prices m/m: 0.3% v 0.2% prior; y/y: 11.8% v 12.2% prior
- (NZ) NEW ZEALAND Q1 WESTPAC CONSUMER CONFIDENCE: 111.9 V 113.1 PRIOR
- (NZ) New Zealand Feb Performance Service Index: 58.8 v 59.5 prior
- (KR) SOUTH KOREA FEB PPI M/M: 0.3% V 1.4% PRIOR; Y/Y: 4.2% (5-year high) V 3.9% PRIOR

***Asia Session Notable Observations, Speakers and Press***
- Asia equity markets are mixed after modest gain on Wall St on Friday, as investor focus turns from central bank statements last week to US policy under Pres Trump. The White House is heading for a busy week, with anticipated House health care legislation coming to the floor and the Senate starting hearings on Supreme Court nominee Gorsuch. In the mean time, there was tension at Trump's meeting with German Chancellor Merkel over the weekend as US leader claimed Germany "owes vast sums of money to NATO", to which German Defense Min replied "There is no debit account in NATO".
- Economic nationalism was also on display at G20, with official Communique affirming commitment against competitive devaluation but also omitting language on promoting free trade thanks to recent threats of more protectionism from US govt. US Treasury Sec Mnuchin urged not to read into the omission, but also maintained that US is now move interested in reducing trade deficits and is prepared to re-examine certain agreements as it transitions to move "fair" trade policies. Elsewhere, US State Sec Tillerson held talks with China on his trip to Asia, discussing North Korea, Taiwan and bilateral trade. Tillerson and Trump remained scornful of North Korea's more aggressive posturing, though China called for restraint and "cool-headed" decisions.
- Economic calendar was very light to start the week, with key data coming from China property sector. House prices rose m/m in 56 out of 70 cities - up from 45 last month - as markets appeared to stabilize in the wake of policy curbing excessive rise of property inflation. Across China's 70 top cities, prices rose 0.3% m/m v 0.2% prior, while y/y rise was comparable at 11.8% v 12.2% prior. China govt continues to make targeted adjustments, particularly in the first tier cities, as regulators raised the downpayment requirement for buyers of 2nd homes in Beijing from 50% to 60% on Friday.

China
- (CN) Beijing raised the downpayment requirement for buyers of 2nd homes from 50% to 60% - Chinese press
- (CN) China Financial News: PBoC's increase of reverse repurchase and mid-term lending facility interest rates had the effect of “targeted” measures to prevent property sector risks as developers with high debt are more sensitive to rate hikes
- (CN) PBoC Gov Zhou: China's growth prospects have improved and we are focused on structural adjustment of the economy - G20 meeting
- (CN) US Sec State Tillerson: US and China discussed safeguarding stability in Asia Pacific; agreed North Korea must be convinced to choose a better path

Japan
- (JP) Japan PM Abe: Germany and Japan should continue as free trade champions; countries are signing "Hanover Declaration"

Australia
- (AU) Goldman Sachs strategist: Expect RBA to raise rates in Nov 2017 - Australian press

Korea
- (KR) South Korea Dep PM Yoo: Govt to consider ways to communicate with China about its retaliatory measures in response to THAAD deployment - Korean press
- (KR) South Korea Fin Min Yoo: See the need for preemptive moves on household debt
- (KR) South Korea Defense Ministry spokesperson: North Korea likely made "meaningful" progress in rocket engine test - press

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei closed, Hang Seng +0.6%, Shanghai Composite +0.1%, ASX200 -0.5%, Kospi -0.5%
- Equity Futures: S&P500 -0.3%; Nasdaq -0.2%, Dax -0.2%, FTSE100 flat

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0735-1.0765; JPY 112.45-112.75; AUD 0.7690-0.7725; NZD 0.7010-0.7040; GBP 1.2380-1.2395
- Apr Gold +0.3% at 1,234/oz; Apr Crude Oil -0.8% at $48.94/brl; May Copper -0.7% at $2.67/lb
- (SA) China and Saudi Arabia agree to increase cooperation in the oil sector, including Saudi oil exports to China - press
- SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 834.1 tonnes; 2nd straight decline
- (CN) PBOC SETS YUAN MID POINT AT 6.8998 V 6.8873 PRIOR; 2nd straight weaker setting
- (CN) PBOC to inject combined CNY100B v CNY60B prior in 7,14, and 28-day reverse repos
- (KR) South Korea sells 10-yr bonds at 2.215%

***Asia equities / Notables / movers***
Australia
- Wesfarmers WES.AU -0.7%; Coles in Western Australia under investigation for asking workers to work for pizza instead of money on a Sunday - NZ press
- Fletcher Building FBU.NZ -10.2%; Cuts FY17 EBIT NZ$610-650M (prior NZ$720-760M); construction division to report an EBIT loss

Hong Kong
- 1088.HK China Shenhua Energy Company Limited +16.0%; Reports FY16 CNY32.0B v CNY25.0B y/y; Rev CNY183.1B v CNY177.1B y/y
- 1184.HK S.A.S. Dragon Holdings Limited +10.3%; Guides FY16 Net +114% y/y or more
- 2488.HK Launch Tech Company Limited +9.0%; Reports FY16 Net profit CNY21.4M v loss CNY93.9M y/y, Rev CNY835M v CNY698M y/y
- 1530.HK 3SBio Inc +4.9%; Reports FY16 Net CNY714.3M v CNY526.2M y/y, Rev CNY2.80B v CNY1.67B y/y
- 819.HK Tianneng Power International +4.0%; Guides FY16 Net +40% y/y or more
- 732.HK Truly International Holdings -3.0%; Reports FY16 Net HK$581.7M v HK$845.4M y/y, Rev HK$22.1B v HK$19.4B y/y
- 1368.HK Xtep International Holdings Limited -9.7%; Reports FY16 Net CNY527.9M v CNY622.6M y/y; Rev CNY5.40B v CNY5.30B y/y

FT : Chinese steel vulnerable to housing market slowdown Premium

Chinese steel vulnerable to housing market slowdown Premium
Finance constraints mean infrastructure investment may not take up the slack

Government-directed infrastructure investment will not be enough to compensate for an anticipated slowdown in real estate investment growth in 2017.
Infrastructure’s already-large share of fixed-asset investment implies that the central government would need to engineer a large and difficult increase in financing if it wanted to counter a housing market slowdown.
Local government investment plans mostly point to a flat or even reduced pace of spending this year.
Infrastructure investment will not grow enough this year to offset an anticipated slowdown in real estate investment growth. That will leave demand for steel, which has helped drive a price rally in recent months, looking vulnerable (see chart).

Recovering real estate investment was the main driver of steel demand in 2016, while prices were also buoyed by government-mandated capacity cuts and another round of stimulus that increased inflows into commodities futures markets. But the housing market will slow this year and financial constraints suggest central and local governments will be unable to fill that breach with a meaningful infrastructure investment boost.

Real estate as driver of steel demand

Investment activity was a highlight of January-February data from the National Bureau of Statistics. Investment in real estate grew 8.9 per cent year-on-year, its fastest pace in two years, while infrastructure investment rose 21.3 per cent.

We do not expect the recovery in real estate investment to last. Under its new maxim that “a home is for living in, not for speculation”, the government has signalled its intent to continue clamping down on the real estate sector this year.

Investment activity may remain supported for now by robust housing sales but local governments are continuing to restrict developers and buyers in accordance with the centre’s policy goals. The People’s Bank of China said its most recent increase in the cost of funding to institutions in the interbank market was in part aimed at the rapid increase in house prices. We expect the cumulative impact of central and local government policy moves to drag real estate investment growth to 3-4 per cent.

The new swing factor

Real estate and infrastructure together account for about 61 per cent of Chinese steel demand (see chart). But infrastructure investment this year will not be enough to take up the slack of a housing market slowdown given how quickly housing is already growing.

Real estate investment grew 6.9 per cent last year from just 1 per cent in 2015 while infrastructure investment growth ticked down to 15.7 per cent from 17.3 per cent (see chart).


Real estate investment has been falling as a proportion of overall fixed-asset investment, to 17.2 per cent last year from 19.7 per cent in 2013, while the share of infrastructure investment has risen to 25.5 per cent from 21.5 per cent (see chart).

These shifts indicate that a longstanding relationship between infrastructure investment activity and steel output has broken down. Previously, they were highly correlated — rising infrastructure investment was a driver of steel output — but even as output rebounded last year, infrastructure investment growth remained relatively stable (see chart).

Instead, real estate investment growth has become the swing factor for steel output. The scale of overall investment is less important to steel output than changes in growth rates. In absolute terms, infrastructure investment has been a key and consistent driver of steel demand, but the upturn in steel prices last year was in direct response to a turnaround in the housing market (see chart).

No repeat of last year’s funding frenzy

Given infrastructure’s already large share of overall investment activity in China, the government would need to provide massive funding support to increase growth significantly from current levels. It has neither the appetite nor the ability to do so. In its work report to the National People’s Congress, the government said it is targeting total fixed-asset investment growth of 9 per cent this year, less than last year’s 10.5 per cent target but more than the 8.1 per cent increase recorded.

The central government’s policy banks have been the main vehicles for financing infrastructure construction. The amount of money lent by the People’s Bank of China to such banks doubled last year to an outstanding Rmb2.05tn ($297bn) while their bond issuance rose 30 per cent to Rmb3.35tn.

Local governments issued Rmb8.5tn in bonds last year, either directly or via companies under their control, up 51 per cent on the total in 2015. We do not think the scale of these funding activities can be replicated in 2017, particularly with the bond market no longer a source of ultra-cheap credit.

The public-private partnership (PPP) model that is currently favoured by officials is a more viable channel for financing but progress here is too slow to make a meaningful contribution to overall infrastructure investment. Just Rmb2.2tn of the Rmb13.5tn in PPP projects registered so far has actually been invested.

The crimped ambitions of local governments

Local governments have demonstrated little appetite for a big ramp-up in investment growth this year. Of the 22 local authorities that have announced investment growth targets for 2017, only five are looking to increase investment growth (see chart). These include the government of the Xinjiang Uighur Autonomous Region, which has raised its investment target by 50 per cent this year to Rmb1.5tn because investment fell in the western region in 2016. Of the remainder, seven are aiming for lower investment growth this year and the remaining ten have kept their growth targets unchanged.

Furthermore, our analysis shows local governments constantly fail to hit their targets. Last year, 14 of 24 local governments missed their investment targets while 14 of 26 missed in 2015 and 18 fell short in 2014.

Don’t rule out an upside surprise

Investment activity has underpinned economic growth at the start of 2017. A continuation of this would provide support for steel demand, helping to justify the steel and iron ore price action of recent months.

The official GDP growth target for this year has been lowered to “around 6.5 per cent” from 6.5-7 per cent. However, the government added a qualifier that growth greater than 6.5 per cent should be sought “if possible in practice”. If the investment activity seen in the first two months carries through the year then above-target growth is achievable.

However, this would presume that, in defiance of the central government’s stated policy goals, speculation will be allowed to continue running rampant in housing markets and that massive volumes of debt will continue to flow to the state sector in pursuit of greater infrastructure investment.

We do not think this is likely, but would never rule out the possibility that long-term reform goals are again sacrificed at the altar of short-term growth.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.

FT : Rivals circle Wood and Amec assets

Rivals circle Wood and Amec assets
Oilfield service companies eye opportunities in overlap from £2.2bn merger

Rival oilfield service companies are circling Wood Group and Amec Foster Wheeler with the aim of picking up assets and contracts likely to be shed by the UK pair as a result of their £2.2bn merger.

SNC-Lavalin of Canada and Petrofac of the UK are among those eyeing opportunities among the fallout from last week’s agreed deal to bring together the two biggest service providers to oil and gas companies in the North Sea.

Wood and Amec may be forced by regulators to sell some overlapping assets to overcome competition concerns, according to industry executives, and some customers served by both companies are likely to look for alternative suppliers to limit dependence on the merged group.

“They are the number one and two North Sea players so there will be competition issues,” said one industry leader, adding that his oilfield service company had already been approached by two large international oil groups keen to diversify their supply chain beyond Wood and Amec.

“Regulators may force them to sell assets but customers will not wait for someone in Brussels to tell them who they can do business with,” said the executive. “They will make up their own minds about how much business they want with one company.”

Wood and Amec provide services such as construction and engineering of oil and gas infrastructure and maintenance of existing facilities, and Amec also has wider operations in nuclear power, infrastructure and mining.

Like all oilfield service providers, both groups have been hit hard by the downturn in investment by oil and gas companies since crude prices crashed in 2014.

Montreal-based SNC has a similar range of businesses to Amec and is run by Neil Bruce, who was chief operating officer of the UK company before moving to Canada in 2015. This connection has raised questions over whether SNC might launch a counterbid for Amec against Wood’s recommended all-share offer.

People with knowledge of its thinking said the group was not interested in buying all of Amec but was on the lookout for assets that might be sold by the UK company before or after it is absorbed by Wood. In particular, SNC is interested in the nuclear business that Amec had already put up for sale before agreeing its deal with Wood.

Petrofac, which is set to be usurped by the enlarged Wood as the biggest UK-listed oilfield services group by revenue, declined to comment on whether it might be tempted to launch a rival bid for Amec. Analysts said the chances of a counter-offer looked slim.

“I don’t think Petrofac has got the firepower . . .[and] it has a raft of its own issues,” said Ashley Kelty, analyst at Cenkos Securities. “Would you expect Halliburton or Schlumberger to come in? Possibly, but I think probably unlikely for competition reasons.”

Wood and Amec both have operations around the world but there is a particular overlap in the North Sea. Société Générale believes the combined group would command 50-60 per cent of the maintenance, modifications and operations market in the region.

One person close to the deal said Wood Group may have to sell its North Sea business, or that of Amec, to alleviate competition concerns. But another source suggested there could be a “managed migration” of contracts to alternative providers.

Wood offered 0.75 of new shares for each Amec share, which were valued at £5.64 each — a premium of 15.3 per cent to the closing price before the deal’s announcement. Wood ended last week down more than 4 per cent at 721p while Amec shares were 1.5 per cent higher on the week at 496.6p. Analysts at Exane BNP Paribas said the proposed takeover had “diluted or overturned” the appeal of Wood for shareholders who favoured its traditionally “conservative” strategy.

Wood Group declined to comment.

FT : TCI steps up campaign to block Zodiac takeover

TCI steps up campaign to block Zodiac takeover
Activist fund threatens sue individual Safran board members

One of Europe’s largest activist hedge funds has stepped up its campaign to block French engine maker Safran’s €8.5bn takeover bid for rival Zodiac Aerospace, threatening to sue every Safran board member personally if shareholders interests are damaged.

The Children’s Investment Fund wrote a letter to the Safran board saying that if the deal leads to a loss of value for Safran “we would have no choice but to seek to recover the damage suffered by the company from you personally”.

TCI last month started a campaign to block the Zodiac deal, which would create the world’s third-largest aerospace supplier by revenue, but this is the first time they have threatened legal action against individual Safran board members. TCI, which manages $14bn of assets, owned 4.1 per cent of Safran in February.

A spokesperson for Safran declined to comment on the letter, which was sent on March 17 and has been seen by the Financial Times.

The escalation comes as Zodiac, which makes seats, galleys and toilets for the aerospace industry, last week blindsided Safran management and investors by reporting a profit warning, its 10th in three years.

This came just two months after Safran management, on announcing the deal in January, said Zodiac had put its past production difficulties behind it.

“We believe, based on what we have seen, what we have discussed with them that, yes, they are at the bottom of their performance,” said Philippe Petitcolin, chief executive of Safran, in January.

Last week Zodiac said that operating profit would fall 10 per cent in the fiscal year ending in August, rather than the forecast increase of as much as 20 per cent. Zodiac Aerospace last year reported consolidated sales of €5.2bn and current operating income of €269.6m.


Shares in Zodiac fell 16 per cent following the warning to €22.99, below the €23.30 share price the day before the Safran deal was announced and short of the €29.47 per share cash bid price.

Following the news, Safran said that Zodiac’s warning “reflects new developments compared with the information available” in January, and that it could review the terms of the deal.

People close to Safran said the bid price could be cut or the deal could even be scrapped completely.

The profit warning prompted TCI to renew its call on Safran to drop its bid for the cabin interiors and seat group.

“In light of Zodiac’s catastrophic business update Safran should immediately cancel its proposed takeover of Zodiac,” said Sir Christopher Hohn, chief executive of TCI, in a letter to Safran management last week.

Many analysts, including Andy Chambers at Edison Investment Research, say there is a strong business case for Safran to acquire Zodiac, giving it increased exposure to the booming civil aerospace sector. However, this is predicated on resolving production problems which have led to delays in aircraft deliveries and sparked sharp criticism from customers such as Airbus.

Others warned that the deal could distract Safran at a time when it is facing its biggest industrial challenge — increasing production of its new Leap jet engine that will be used on next generation versions of narrow-body aircraft made by Boeing and Airbus.

>>> Unilever could divest spreads arm at approximate brand value; CD&R, CVC and

Unilever could divest spreads arm at approximate brand value; CD&R, CVC and Bain work on bids - reports

Unilever [LON:ULVR, AMS:UNA] would “happily” sell its underperforming margarine and spreads arm if it receives a bid approaching the value of the unit’s brands, a senior source linked to the business said, The Sunday Times reported.
The report said that the potential GBP 6bn (USD 7.4bn) sale would likely prove attractive to private-equity companies.
Inside sources said PE firms including Carlyle [Nasdaq:CG] and Advent International have been eyeing the spreads business for a number of years, the item reported.
Sources cited in a Sunday Telegraph report said private-equity firms Clayton Dubilier & Rice, CVC and Bain Capital are already preparing bids for Unilever’s spreads business. The division generates earnings of approximately GBP 480m, or around 4% of total revenues, the report said.
Unilever is speeding up a previously planned strategic review in the wake of a failed USD 143bn attempt to take over the business by US food giant Kraft Heinz [Nasdaq:KHC], the Times item reported. Measures to restructure and reduce costs are to be outlined next month, including the potential sale of the spreads unit, the report said.
Paul Polman, Unilever chief executive, was stridently opposed to any deal but more than half of Unilever’s shareholders are believed to have backed entering negotiations with Kraft Heinz, according to a report from brokers at Bernstein last week, the item reported.
Unilever’s spread brands include Stork and Flora.
The original reports appeared in The Sunday Times, Business section, page 1; and The Sunday Telegraph, Business section, page 1

FT : Vivendi chief says Mediaset misled over deal

Vivendi chief says Mediaset misled over deal
Media group chief alleges Italian rival gave ‘wrong’ information when link-up pursued

The chief executive of Vivendi has accused Italian group Mediaset of providing “misleading” information during negotiations over a tie-up last year, upping the stakes in the acrimonious stand-off between former Italian premier Silvio Berlusconi and French billionaire Vincent Bolloré.

Tensions between Mr Berlusconi, who founded and owns 40 per cent of Mediaset, and Vivendi chairman Mr Bolloré have been rising ever since Vivendi’s €880m deal to acquire 3.5 per cent of the Italian group and all of pay-TV channel Mediaset Premium fell apart in July. 

The move — a feature of a wider agreement in which Mediaset would take 3.5 per cent of Vivendi — was part of the French group’s strategy to build a southern European media powerhouse to take on Sky and combat the growing threat from new global online streaming services such as Netflix.

Despite reports in Italy of a possible peace deal between the two parties, Arnaud de Puyfontaine, Vivendi’s chief executive, told the Financial Times that attempts to find a resolution had so far failed. He suggested that Vivendi received “wrong” information during talks about the deal.

In remarks echoing comments Mr De Puyfontaine made to the FT last August, when he suggested Vivendi had been sold a “Ferrari” which turned out to be a “Fiat Punto”, he said: “We signed an agreement in April 2016. We made it very clear that the nature of the information provided to us was misleading and we tried to find a way to get out of what was a kind of situation in which we were not happy.”

Mediaset responded to Mr De Puyfontaine’s comments by saying the French company had signed the deal after one month of due diligence.

“They had plenty of time to check Mediaset Premium fundamental financial and commercial data,” the company said. “On the basis of this due diligence they were able to agree a price . . . and [there were] only three specific reasons to refuse the closing. Not one of these reasons occurred and therefore Vivendi started to manipulate the truth creating huge damages to Mediaset”.

On the question of agreeing a deal with Mr Berlusconi, Mr De Puyfontaine said: “Unfortunately circumstances have proved that the fair approach and the willingness to find [a solution] have been proved wrong by the events.”

Apart from a brief meeting between Mr De Puyfontaine and Mr Berlusconi’s son Pier Silvio in December, there have been no discussions between the two groups since July 25, according to one person with knowledge of the dispute.

“There is no sign of a foreseeable agreement,” the person added.

Since Mr Bolloré backed out of the deal, the French corporate raider has reacted by building the second-biggest stake in Mediaset at 30 per cent, behind Mr Berlusconi’s Fininvest, which holds 40 per cent.

In February, it emerged that Milan prosecutors were investigating volatility in Mediaset’s share price following the collapse of the deal with Vivendi. Mr De Puyfontaine, who is reported to be on the list of names being investigated, insisted the claims were “abusive and unfounded”.

Asked if he was confident he would be cleared, he replied: “I am, I am, I am. Is there something of substance to what I have been alleged? The answer is no.”

Francois Godard, an analyst for Enders in Paris, said he would “not be surprised” if Mediaset had been “too optimistic about its assets”, when the Italian group struck its agreement with Vivendi last April.

“They could have said a lot of things,” said Mr Godard. “But on the other hand I do not think Bolloré is a person who believes everything he is told.”

Despite the fall out between Mr Bolloré and Mr Berlusconi, Mr De Puyfontaine said Vivendi would not be deterred from its strategy of Italian expansion — part of a wider aim for the music, TV, film and games group to become one of the world’s most powerful media conglomerates.

“Italy is very special,” said Mr De Puyfontaine. “The vision of Vivendi with a strong foothold in Southern Europe remains.”

Central to that plan is to create partnerships with telecoms companies, the Vivendi chief executive said, insisting it was “not my intention” to sell off the French company’s 24.9 per cent stake in Telecom Italia to pursue Mediaset.

But some analysts and investors worry that having streamlined the company by selling down assets over the past few years, Mr Bolloré has embarked on a fresh spending spree, snapping up a majority stake in video games producer Gameloft as well as a 24.9 per cent shareholding in Telecom Italia in the past 12 months.

While overall revenues for the group in 2016 were largely flat at €10.8bn, earnings before interest and tax were down 2.9 per cent. Universal Music was the best performer, raising revenues by 4.4 per cent, as it benefited from a 58 per cent increase in streaming revenues. 

But French pay TV channel Canal Plus saw a 4.2 per cent drop in revenues last year. While Mr De Puyfontaine says the company has taken drastic steps to save the “sick child” of the Vivendi family, analysts say its strategy is confusing.

“Over the course of time, Vivendi has done the hokey cokey,” said Thomas Singlehurst, an analyst at Citi. “At one point they were out of telcos and now they are back in. They were out of games and now back in. You can understand the confusion among investors.”

FT : Alessandro Profumo replaces Mauro Moretti at Leonardo

Alessandro Profumo replaces Mauro Moretti at Leonardo
Veteran banker to take helm at state-controlled Italian defence and aerospace group

Veteran banker Alessandro Profumo is set to become the next chief executive of state-controlled Italian defence and aerospace group Leonardo in a “spoils system” shake-up of the top jobs at some of Italy’s largest companies.

Along with Mr Profumo, the former chief executive of UniCredit and chairman of Monte dei Paschi di Siena who has no experience in the defence industry, new bosses are set to take over at Italy’s national post office, Poste Italiane.

The review every three years of the top positions at Italy’s largest state-owned companies is a “spoils system” where seats are handed out to executives considered close to or supportive of the government.

Matteo Del Fante, a former JPMorgan banker close to former prime minister Matteo Renzi, has been proposed by the Treasury as chief executive of Poste Italiane, taking the place of its current well-regarded boss, Francesco Caio. Bianca Maria Farina, one of Italy’s most senior women executives who sits on the board of the Vatican’s financial regulator, will be the new chairman of the post office.

The appointment of Mr Profumo at the company formerly known as Finmeccanica is seen as a promotion for the veteran banker with longstanding ties to Italy’s centre left. Mr Profumo made an inglorious exit from UniCredit in 2010 but salvaged his reputation by agreeing to be chairman of the Italian bank Monte dei Paschi as it teetered on the brink of collapse.

He replaces Mauro Moretti who was put out of the running for another term after he was convicted and sentenced in January to seven years in prison for his role in a rail crash in 2009 that killed 32 people in the Tuscan town of Viareggio. Mr Moretti is appealing against the conviction.

Remaining in their jobs are Eni’s incumbent chief executive, Claudio Descalzi, who is facing trial over corruption charges and chairman Emma Marcegaglia, and Francesco Starace and Patrizia Grieco, incumbent chief executive and chairman, respectively, at Enel. Mr Descalzi has denied wrongdoing.

The nominations made by Italy’s Treasury on Saturday are still to be confirmed by investor meetings in the coming weeks, but given the Italian state’s position as majority shareholder this is a formality.

This year’s round of appointments was closely watched for signs of the influence still held by former prime minister Matteo Renzi who resigned as premier in December after a devastating referendum loss.

The promotion of Mr Del Fante to Poste Italiane, replacing Mr Caio, a former chief executive of Avio who had successfully taken the post office public, was seen as a sign of the ongoing influence of the former prime minister on the appointment system. Mr Del Fante’s previous role as chief executive of state energy grid operator, Terna, is expected to be taken by former Enel executive, Luigi Ferraris.

The Five Star Movement, a populist party running neck and neck with the left in opinion polls, decried what it perceived as Mr Renzi’s continuing influence.

“Renzi managed the nominations and put his own men in the jobs. This is intolerable and dangerous,” Five Star founder, Beppe Grillo, said.

The nominations were also controversial for Mr Profumo’s promotion and the exit of Mr Caio, who had successfully taken the Poste Italiane public two years ago and increased net profit by 13 per cent last year. Mr Caio told Italian media that “in a normal country” he would have been reconfirmed for such results. Mr Caio was widely seen as having irritated Mr Renzi by refusing to use the post office to rescue Italy’s ailing bank Monte Paschi last year and avoid a state bailout, say people familiar with the matter.