Italy's first state sell-off meets strong demand: Credito Italiano float is seen as test for privatisation

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THERE WAS strong demand yesterday for shares in Credito Italiano, the Italian state- owned bank, as Italy's first big privatisation got under way.

The disposal of Credito Italiano, the country's sixth- largest bank, is expected to raise some 1,800bn lire ( pounds 700m). It is seen as a test for a large number of companies waiting to be sold off.

'Our credibility abroad depends on the sale being a success,' said Romano Prodi, president of the IRI state holding corporation and a leading figure behind the ambitious privatisation programme.

IRI set the price on its 67 per cent stake in Credito at L2,075 per share, a near 10 per cent discount to the quoted price on Friday last week.

IRI hopes to attract first-time buyers to the market in a country where families have traditionally lent their large savings to the state in the form of bonds. The offer closes on Friday.

'The most important thing about this privatisation is not how much cash it raises, but that it should go well,' said Nicola Braendli, chief trader at the Milan broker Akros.

Italy unveiled its selection of companies to be privatised in summer 1992. But the start of the sell-off has been delayed by political in-fighting and arguments over the best ways of spreading share ownership.

As well as providing funds for the heavily indebted state coffers, privatisation is seen as a way of breaking decisively with a system of party political control over the economy that did so much to foster corruption.

The political debate has been dominated by arguments between those, like Mr Prodi, who campaigned for privatisation by flotation through a public company - the method used for Credito Italiano - and those favouring the so-called French option, of creating a core of shareholders responsible for corporate strategy.

Mr Prodi defended flotation as a 'once-and-for-all opportunity to encourage economic pluralism' in an economy traditionally dominated by a few big private and state companies.

At least 40 per cent of the Credito stock being sold off is reserved for individual Italian investors. Those subscribing for a minimum of 2,500 shares worth L5,187,500 would receive a free share for each block of 10 purchased and held for three years, up to a limit of 1,500 free shares. Domestic and foreign institutions can tender for the rest of the shares.

Under the terms, no shareholder may own more than 3 per cent with voting rights. Credito shares closed down L50 at L2259.