UPDATE 2-Italy to sell second stake in post office to cut debt

* Cabinet meeting approved sale of up to 30 pct of post

* Treasury also transferred 35 pct of Poste to state lender

* Rome has goal of 8 bln euros in privatisation proceeds
this year

(Adds government statement)

By Francesca Landini and Francesca Piscioneri

ROME/MILAN, May 31 Italy is hoping to raise
around 2.7 billion euros ($3 billion) from the sale of a second
stake in its post office, Poste Italiane, by year-end
as it struggles to meet a commitment to cut its public debt

Rome plans to raise 8 billion euros from privatisations this
year to make a dent in a debt pile now running at 132.7 percent
of gross domestic product, the second highest in the euro zone.
No sale has taken place so far.

A cabinet meeting on Tuesday approved a decree allowing the
treasury to put on the market up to 30 percent of the national
post office, the government said in a statement.

“The sale can be done in one or more steps, through a share
offering to Italian savers, including Poste employees, and/or
institutional investors in the country and abroad,” the
government said.

A source close to the matter said the share sale would
likely take place in autumn and be done in one step, if market
conditions were favourable.

The treasury sold a 35 percent stake last year. Last week it
said it would transfer another 35 percent holding to state
lender Cassa Depositi e Prestiti (CDP), a sort of sovereign
wealth fund that has become the investment arm of Prime Minister
Matteo Renzi’s industrial policy.

Renzi last year triggered a shake-up of the CDP’s
management, appointing two top bankers at its helm to make the
agency more active in supporting a feeble economic recovery.

Since then, CDP paid 900 million euros to buy a stake in oil
service group Saipem from oil major Eni. At
current market prices the stake is worth 476 million euros.

It also put 500 million euros in a hastily created bank
bailout fund meant to back-stop lenders struggling to raise cash
on the market. CDP is now expected to play a role in the rescue
of steel maker Ilva as well as in the rollout of an ultra-fast
broadband network.

Analysts said putting the Poste stake under the CDP’s
umbrella would boost the agency’s stretched coffers.

“The treasury’s main goal is to give CDP a precious asset
that would generate dividends and cash flow,” Stefano Caselli,
vice-rector at Milan’s Bocconi University, said.

CDP’s net profit more than halved to 893 million euros in
2015 from 2.2 billion euros the previous year, while the
dividend paid to the treasury remained stable at 683 million

Crucially, CDP debts are not consolidated into Italy’s
overall public debt, allowing the government to use it to back
ambitious development and infrastructure projects without
further stretching its finances. ($1 = 0.8975 euros)

(Additional reporting by Luca Trogni, editing by Silvia Aloisi
and Adrian Croft)

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