News Analysis: Italian companies become attractive takeover targets, positive for Italy

Swiss airport retail giant Dufry last weekend announced a plan to take over Italian rival World Duty Free, the latest in a series of deals that have seen foreign companies pounce on Italian firms, taking advantage of the weak euro and Italy's anemic economy and credit markets.

Some Italian media and domestic trade unions have criticized the string of takeovers in recent months. But analysts say it is likely to be a positive development for Italy.

The Dufry takeover of World Duty Free is significant in that it will create the world's largest airport retailer. Reports are that Dufry has been eyeing World Duty Free for months, and that the company was able to make a move only after a 22-percent decline in the value of the euro this year compared to the Swiss franc.

The deal is not unique: a week ago, the China National Chemical Corporation, best known as ChemChina, took the first steps toward a multi-billion-euro takeover of Italian tire maker Pirelli.

Earlier in the year, Japan's Hitachi acquired control of troubled Italian train and railroad equipment maker Ansaldo.

And last year, Etihad Airways, based in the United Arab Emirates, took control of Italy's flagship air carrier Alitalia.

Dozens of smaller deals have also been closed or are in the works in the last six months, according to analysts.

The weak euro is a big factor in the trend. But analysts note the trend is not mirrored across the euro zone. They say the country's troubled economy is another big reason the acquisitions are taking place.

"Most Italian companies are severely under capitalized," Alberto Majocchi, an economist with the University of Pavia and president of Italy's Institute for Economic Studies and Analysis, said in an interview. "That, combined with the weak euro, can make them attractive targets."

The under-capitalization of Italian firms is one of several reasons companies often benefit from foreign takeovers.

"The injection of new capital, along with a clearer vision of the future of the company and new management all contribute to the company's changes for success," Majocchi said.

Prometeia, a Bologna-based consultancy, has conducted research showing that Italian companies that are acquired by foreign entities generally perform better than they did as autonomous companies, and they are more likely to distance themselves from domestic rivals operating in similar sectors.

"The companies taken over created more jobs, their revenue increased faster, they reacted quicker to changing conditions, and they benefited from larger economies of scale," Claudio Colacurcio, an economist with Prometeia, told Xinhua.

Colacurcio said that despite the fact that foreign ownership means profits are more likely to end up in foreign bank accounts, it still represents a net positive for Italy.

"Some of these companies might not survive without foreign help, and in any case it's better to have a strong, vibrant company that is a subsidiary of a foreign parent company than a weaker company that is entirely domestic," Colacurcio said. Endit