Enel in €4.1 Billion Offering; The Year’s Second-Largest Equity Offering Worldwide

Cleary Gottlieb represented Italy’s leading electric company Enel S.p.A. in the sale by the Italian Ministry of the Economy and Finance of 575 million of Enel’s ordinary shares.  As the fourth step in Italy’s privatization of Enel, the sale reduced the Ministry’s direct stake from 31.2% to 21.9%.  Proceeds of €4.1 billion make it the year’s second-largest equity offering worldwide (second only to Gaz de France’s €4.5 billion IPO, in which Cleary Gottlieb represented Gaz de France).  The transaction is expected to be the largest in Italy this year.

Cleary Gottlieb previously represented Enel in the Ministry’s October 2004 sale of more than €7.6 billion of Enel’s ordinary shares.  Both that sale and this most recent one involved a retail offering in Italy, a public unlisted offering in Japan and a fully documented Rule 144A/Reg. S offering (under the “founder’s shares” exception) in the U.S. to international institutional investors.

The timing of this latest offering – closely following Enel’s release of its first quarter interim report – posed particular challenges.  The interim report contained, for the first time, consolidated financial statements prepared in accordance with International Financial Reporting Standards, rather than Italian GAAP.  As a result, the offering documents needed to include both full-year Italian GAAP financials and IFRS quarterly financial data.  The change in accounting principles raised significant issues, including the extent of comfort the independent registered public accounting firm was prepared to provide, as well as the need to craft related disclosure. Complicating matters further were two significant pending divestitures, which prompted Enel to include Italian GAAP pro forma financial statements in the offering documents.  Further exacerbating these challenges was the accelerated timetable.