PARIS/ROME (Reuters) - France will nationalize the STX France shipyard to prevent an Italian firm taking majority control, the economy minister said on Thursday, triggering an angry response from Rome to President Emmanuel Macron’s first big industrial policy decision.

The logo of STX is seen during a press conference at the STX Les Chantiers de l'Atlantique shipyard site in Saint-Nazaire, western France, western France, January 4, 2017. REUTERS/Stephane Mahe

As France’s most avowedly pro-business leader in decades, few would have predicted the former investment banker’s first big move in the corporate sector would be a nationalization, even if the government says it will only be temporary.

However, his action, which added further strain to France’s relationship with Italy, fits with the interventionist style of other postwar French leaders. It also crosses into the defense sector, where many national governments prefer to wield influence over ownership.

The Italian state-owned shipbuilder Fincantieri (FCT.MI) had reached an agreement in May to pay 79.5 million euros ($93.20 million) for two-thirds of STX France, which is being sold because of the collapse of its South Korean parent, STX.

This week it rejected a French government proposal to settle for 50-50 ownership instead.

That prompted the French state, which had a minority stake, to exercise pre-emption rights to buy out other shareholders before those rights expire at the end of the month, in effect giving Paris more time to come up with another solution.

“This decision is in line with the economic strategy that we want to build with the president of the Republic and the prime minister,” Economy Minister Bruno Le Maire told a news conference.

“We want to free up France’s exceptional productive capacities and protect our strategic interests,” he said, adding that the 50-50 ownership offer was still on the table and that he would visit Rome on Tuesday.

While Italy’s government warmly welcomed the election of Macron in May, viewing the pro-European centrist as someone who could help Rome on an array of issues, the STX move added to other decisions that have upset it.

Macron’s talks this week with Libyan leaders irritated Rome, which had previously taken the lead in efforts to bring peace to its former North African colony, and was already disappointed by the new president’s migration policies.

“INCOMPREHENSIBLE”

The STX nationalization also goes to the heart of Italy’s long-held view that French companies’ acquisitions on its territory are a one-way street.

Italian Economy Minister Pier Carlo Padoan and Industry Minister Carlo Calenda called France’s decision to nationalise the shipyard “grave and incomprehensible”.

“Nationalism and protectionism are not an acceptable basis for establishing relations between two great European countries,” they said in a joint statement.

The prospect of a Fincantieri takeover had raised fears in France about jobs at the Saint-Nazaire site, and the government was also concerned about the strategic importance of the yard, the only one in the country big enough to build aircraft carriers and other large warships.

Related Coverage French shipyard move 'incomprehensible' says angry Italy

“The Saint-Nazaire shipyards are not destined to remain under state control,” Le Maire said. “The pre-emption decision is temporary and should give us the time to negotiate in the best conditions.”

The decision, which was welcomed by French politicians of all political stripes, flies in the face of any expectations that Macron, who in his former post as economy minister sought to liberalise swathes of the economy, would break with the French state’s tradition of intervention in business.

Even while economy minister, Macron forced through a shareholder vote that increased the government’s power over carmaker Renault. Since becoming president in May, he has also forced carmakers to help fund a failing parts manufacturer.</s>France will nationalise the STX shipyard, a leading builder of cruise ships, Economy Minister Bruno Le Maire announced Thursday, raising the stakes in a dispute with Italy over control of the site.

"We have taken the decision to exercise the state's right of preeemption on STX," Le Maire announced, insisting it was just a "temporary" move while France continued negotiations with Italy on shared ownership of the firm.

The dispute was sparked by Italian ship building company Fincantieri's refusal to accept an offer to split STX's capital equally.

Fincantieri agreed in May to pay €79.5 million for two-thirds of STX France, which is being sold following the collapse of South Korean parent STX, but the Italian bid has raised fears for French jobs at the Saint-Nazaire site on the Atlantic Coast.

Italian interests rejected the French proposal for ownership of STX France to be split equally between Italian state-owned shipbuilder Fincantieri and Paris.

Both Fincantieri Chief Executive Giuseppe Bono and Italian Industry Minister Carlo Calenda raised the prospect that Fincantieri could walk away from the deal if France backed away from conditions agreed under the former government of President François Hollande, who left office in May.</s>The French state said on Wednesday it would nationalise the STX France shipyard if Italy does not accept its offer to split STX's capital equally, putting down a marker on the limits of economic liberalism under new President Emmanuel Macron.

The threat raises the stakes in a standoff over the shipyard's fate, the only one in France with facilities large enough to build aircraft carriers.

Fincantieri agreed in May to pay 79.5 million euros ($92.6 million) for two-thirds of STX France, which is being sold following the collapse of South Korean parent STX, but the Italian bid has raised fears for French jobs at the Saint-Nazaire site on the Atlantic Coast.

French Economy Minister Bruno Le Maire said nationalisation would give the state more time to find a better shareholder deal, but even if temporary, it would mark the first major state intervention in the corporate world by Macron's government, which was elected on a pro-business platform.

Italian interests rejected the French proposal for ownership of STX France to be split equally between Italian state-owned shipbuilder Fincantieri and Paris.

Both Fincantieri Chief Executive Giuseppe Bono and Italian Industry Minister Carlo Calenda raised the prospect that Fincantieri could walk away from the deal if France backed away from conditions agreed under the former government of President

 Francois Hollande, who left office in May.

"We are Europeans and on STX we cannot accept being treated worse than the Koreans," Bono said on a conference call in reference to the shipyard's previous majority owner.

Italian Economy Minister Pier Carlo Padoan later took a more conciliatory tone, saying Italy was open to changing the terms of the deal, but insisted Fincantieri must have control.

"We have offered to listen to the new government's requirements, but there is no reason why Fincantieri should give up a majority stake and control of the French company."

Trade unions are split over the nationalisation option, with the hardline Force Ouvriere in favour but others against.

"Some people here will be glad about nationalisation but that's not what will bring us work. Our clients need certainty," said Christophe Morel, representative of the CFDT, France's biggest trade union.

Le Maire said Fincantieri was welcome to invest in STX but on an equal footing with French partners and said that the Italians had until Thursday to make up their minds about the offer on the table.

"If our Italian friends say 'this deal does not work for us, we don't agree with 50/50', the state will exercise its pre-emption rights on STX," Le Maire told franceinfo radio. "We

 will buy shares, we are majority owners and we will give ourselves time to negotiate a new shareholder pact."

Under an existing pact, the French state has a pre-emption right to buy out shareholders that runs until the end of the month.

Le Maire said the cost of buying out STX's other shareholders was "on a scale of tens of millions of euros rather than in the billions of euros".

Fincantieri's shares closed down 8.7 percent at 0.959 euros a share following the STX France news and after it published first-half earnings.

Macron was elected in May on promises to boost growth by lifting constraints on business and his government has since flagged plans to privatise non-strategic state holdings while easing labour regulations.

However, it has also not hesitated to lean on carmakers Renault and PSA Peugeot Citroen, in which the state owns stakes, to help a struggling parts maker in a region where jobs are scarce.

Macron decided after his election to review the terms of Fincantieri's deal to acquire the STX France stake.

"We are not happy with the deal negotiated by the previous government because it does not allow French shareholders to keep control of jobs, industrial capacities and regional development," Le Maire said.

The French side has been concerned the Italians would shift projects from Saint-Nazaire to Italy as the shipyard's order book for huge luxury ocean liners is currently brimming over.

But the French also have a strategic interest in the shipyard for its capacity to build warships. Le Maire offered to extend naval construction cooperation as part of a 50/50

 ownership deal.</s>French President Emmanuel Macron has made his first major intervention in the corporate world by nationalising a shipyard to stop it falling into Italian hands.

In a move that shows the limits of the new government’s economic liberalism, the finance ministry on Thursday said the state was exercising its pre-emption right to buy out all the shareholders in STX France.

Bruno Le Maire, the economy minister, said that the decisions had a “single objective”, which was to “defend France’s strategic interests in shipbuilding” and guarantee that jobs remain in the country.

Italian state-owned shipbuilder Fincantieri earlier this year struck a preliminary deal to buy two-thirds of STX France, based in Saint-Nazaire on the French Atlantic coast, which is being sold following the collapse of South Korean parent STX last year.

Mr Macron subsequently expressed concern about the deal, agreed by the previous government. On Wednesday Mr Macron threatened to nationalise the whole company unless the Italians agreed to a 50/50 ownership split.

The government is worried about job cuts at the company, which employs more than 2,500 people, and also security issues. The shipyard is the only one in France with facilities large enough to build aircraft carriers.

The Italians declined the offer of a 50/50 split this week, with the Italian economy minister saying that Mr Macron was failing to live up to the “pro-Europeanism and liberal values” he espoused in his presidential campaign.

Mr Macron discussed STX in a telephone call with Paolo Gentiloni, Italy’s prime minister, on Thursday, but senior Italian officials were furious.

“Nationalism and protectionism are not acceptable ways to regulate relations between two great European countries. For shared projects one needs trust and mutual respect,” Pier Carlo Padoan, Italy’s finance minister, and Carlo Calenda, Italy’s economic development minister, said in a joint statement.

Mr Le Maire on Thursday said that the site was not going to stay under state control, and the government’s move would enable them to negotiate with buyers from a position of strength. Mr Le Maire said they would continue talking to the Italians.

“”The Saint-Nazaire shipyards are not destined to remain under state control,” he said, adding he would visit Rome next week. “The pre-emption decision is temporary and should give us the time to negotiate in the best conditions.”

Mr Macron, although elected on a liberal and pro-business platform, has throughout his career never been afraid to use the power of the French state to intervene in the corporate world.

When he was economy minister for the previous Socialist government, Mr Macron delayed the sale of French video start-up Dailymotion to a Hong-Kong company, securing a successful last-minute bid from Vivendi. He also built up a stake in carmaker Renault through the use of derivatives contracts.

In the case of STX, one cruise industry executive, however, said Paris was concerned about technology transfer to the Chinese with the Italian deal, since Fincantieri has launched a joint shipbuilding project in China this year. But Italian officials dismissed this as a red herring, saying the co-operation with the Chinese was limited and there would be ways to mitigate the risk of any loss of intellectual property.

Italian commentators were also heavily critical of Mr Macron’s decision. “Shipbuilding is a sector in which Europe is a world leader and there is a need for consolidation: it’s stupid to make everything fall apart because it’s not the French but the Italians in the lead,” said Andrea Goldstein, chief economist at Nomisma, a research firm in Bologna.

“The more weeks go by, the more Macronism is showing an old face, it’s the usual France with its protectionist, sovereignist, statist, dirigiste instincts,” wrote Adriana Cerrettelli, in an editorial in Il Sole 24 Ore.

The nationalisation move comes as Mr Macron is facing falling approval ratings at home — an opinion poll over the weekend showed the second-biggest decline in popularity for a French president so soon after an election.

His approval ratings fell 10 percentage points to 54 per cent this month, according to pollster Ifop. Only Jacques Chirac in 1995 lost so much ground in such a short time after being elected.</s>President Emmanuel Macron has decided to take the STX shipyard at Saint-Nazaire in Brittany into temporary public ownership, Le Monde newspaper reported on Thursday.

Economy Minister Bruno Le Maire later confirmed the move, saying that it was to "defend France's strategic interests" but stressing that it was only temporary.

Earlier on Thursday government spokesman Christophe Castaner said the government's aim was not to nationalise STX and that Le Maire's threat to do so the previous day was part of the negotiating process with Italian company Fincantieri.

"It's quite usual that the government should up the ante," he told French TV. "It's as in diplomacy. You have to have some weapons [...] It allows you to negotiate better."

And a government source told Le Monde that the long-term objective was not to keep the shipyard in public ownership but to "gain time" after Fincantieri rejected a French proposal of 50-50 ownership.

Le Maire said that negotiations with the Italians would start again on Tuesday.

The French state already holds a 33 percent share in the shipyard, where famous ocean liners such as the France, the Harmony of the Seas and the Queen Mary 2 have been built.

After a period of crisis in the industry, business at Saint-Nazaire, which directly employs 2,600 people and provides work for more than 4,000 others, has picked up and the order book is now full.

But STX, the South Korean conglomerate that had a majority share in the shipyard, recently went bankrupt and its creditors put its French subsidiary up for sale.

There was only one bidder - Fincantieri, Europe's biggest boat-builder and a historic rival to Saint-Nazaire.

A South Korean court approved the Italian company's offer of 79.5 million euros for a 66.6 percent share of the capital, a deal that was to come into effect on Saturday.

But politicians and unions feared that Fincantieri would transfer jobs to Italy and technical expertise to China, given that it has a technology-transfer agreement with the China State Shipbuilding Corporation.

Opponents of the deal also claimed that France's sovereignty was under threat since Saint-Nazaire is the only shipyard to build large warships for the French navy.

Under the previous French government a deal was reached that allowed Fincantieri 48 percent ownership but also given a Trieste-based foundation seven percent.

On being elected in May, Macron scrapped this deal, apparently believing the Trieste company was Fincantieri front.

The French government then proposed a 50-50 division, leaving Fincantieri the right to name the yard's bosses, but Rome turned that option down.

On Wednesday Le Maire told the Italians that, if they did not accept that offer, the French state would exercise its right to buy up the 66 percent share they are bidding for.

So, according to Le Monde, the government has decided to take the yard over at a cost of 80 million euros, but only as a temporary measure.

Opposition politicians have already declared their support for such a move.

"It's not a problem of nationality, it's a problem of competition. The biggest competitor is the Italian," right-wing Senator Bruno Retailleau, who is chairman of the regional council that covers Saint-Nazaire, told RTL radio.

"The national and strategic interest of the Saint-Nazaire shipyards justifies the state getting involved," Socialist MP Boris Vallaud said.

Macron's stance has been less well-received in Italy.

"The new occupant of the Elysée gives a poor image of himself," La Stampa newspaper commented, asking why it was deemed acceptable that a Korean company hold 66 percent of a French company but not that an Italian holds 51 percent.

The position does seem to be something of a reversal of Macron's enthusiastic support for market solutions to economic and social problems.

During the final presidential election TV debate in May, he mockingly accused far-right candidate Marine Le Pen of proposing to nationalise the Whirlpool white goods factory threatened that was threatened with closure.

But a civil servant who has worked with the president told Le Monde that, like former economy minister Arnaud Montebourg who unsuccessfully tried to take over the Florange blast furnaces to prevent their closure, Macron stands in the French tradition of state intervention in the national interest.

And, after all, the takeover, if it takes place, is only supposed to be temporary.</s>ROME (Reuters) - France's decision to nationalise the STX France shipyard to prevent an Italian firm taking majority control was "grave and incomprehensible", Rome's economy and industry ministers said in a statement on Thursday.

Economy Minister Pier Carlo Padoan and Industry Minister Carlo Calenda said there was no good reason why Italy's state-owned shipbuilder Fincantieri (FCT.MI) could not have taken a majority stake in STX France.

"Nationalism and protectionism are not an acceptable basis for establishing relations between two great European countries," the pair said in a statement. "To work on joint projects you need reciprocal trust and respect."

Paris announced earlier on Thursday it would nationalise STX France after Fincantieri rejected a French offer this week of 50-50 ownership. The shipyard is being sold because of the collapse of its South Korean parent.

French Economy Minister Bruno Le Maire said the government had stepped in to protect the country's strategic interests. The minister, who said the 50-50 ownership deal remained on the table, is due to travel to Rome on Tuesday to discuss the issue.

Calenda and Padoan said they did not understand why a South Korean company had been allowed to buy a two-thirds stake in STX France and not an Italian firm.

"(The Fincantieri) deal guaranteed the protection of jobs in France and French know-how through a balanced system of governance in a genuinely European framework," the two ministers wrote.</s>PARIS, July 27 (Reuters) - The French government has decided to nationalise the STX France shipyard in an ownership standoff with Italy, Le Monde newspaper reported on Thursday, marking President Emmanuel Macron's first big industrial policy decision.

As France's most pro-business leader in decades, few would have predicted the former investment banker's first big move in the corporate sector to be a nationalisation.

However, his action fits with the interventionist style of other postwar French leaders. It also crosses into the strategically sensitive defence sector where many national governments prefer to wield influence over ownership.

The Economy Ministry would not comment on the report when asked by Reuters, but said it would hold a news conference on the subject at 3:00 pm (1300 GMT).

Economy Minister Bruno Le Maire had given the Italians until Thursday to accept an offer for 50/50 ownership of the shipyard, brandishing the threat of a temporary nationalisation to buy time to find another solution if the offer were rebuffed.

"The aim is not to nationalise Saint-Nazaire, but we have to temporarily," Le Monde reported a source close to the matter as saying, referring to the site where the shipyard is located on France's Atlantic coast.

Italian state-owned shipbuilder Fincantieri agreed in May to pay 79.5 million euros ($93.20 million) for two-thirds of STX France, which is being sold following the collapse of South Korean parent STX.

The Italian bid has raised fears about French jobs at the Saint-Nazaire site and the French government is also concerned about the strategic importance of the yard, the only one big enough in France to build aircraft carriers and other large warships.

Le Monde reported that without action from the French state STX France would have come under control of Fincantieri when rights it holds to buy out other shareholders expires at the end the month.

The decision flies in the face of any expectations that Macron, a former economy minister who sought to liberalise swathes of the economy, would break with the French state's tradition of intervention in business in favour of a more laissez-faire approach.

The new president also has a record of intervening where he has the power to.

While he was economy minister under his presidential predecessor Francois Hollande, he forced through a shareholder vote that increased the government's power over carmaker Renault, falling out with its boss in the process.

Since taking presidential power in May, he has also forced carmakers to help fund a failing parts maker.

Macron was elected in May on promises to boost growth by lifting constraints on business and his government has since flagged plans to privatise non-strategic state holdings while easing labour regulations. (Reporting by Leigh Thomas; Addtional reporting by Myriam Rivet; Editing by Andrew Callus)</s>PARIS: The French government, sparking a row with Italy, announced plans on Thursday (Jul 27) to temporarily nationalise the country's biggest shipyard after failing to agree a deal with a prospective Italian owner.

After Economy Minister Bruno Le Maire announced the decision, saying it sought to protect France's "strategic interests," the Italian government expressed outrage, saying the move was "inexplicable".

In a later development, an aide to Emmanuel Macron said the French president had called Italian Prime Minister Paolo Gentiloni to "clear away any misinterpretation" of France's actions.

Macron said the nationalisation was simply a "transitional decision" and France "obviously wishes the deal to include a major role" for the Italian suitor, the state-owned shipbuilder Fincantieri, the source said.

"Mr. Gentiloni was much placated" by the conversation, the source added.

Le Maire announced France had taken the decision to exercise the state's right of "pre-emption" on STX.

He insisted it was just a "temporary" move while France continued negotiations with Italy on shared ownership of the firm.

The shipyard, located in the western port of Saint-Nazaire, has turned out some of the world's biggest cruise liners and also builds warships.

The facility has unique know-how that should not be lost to abroad, Le Maire argued.

"We want to assure the workers, but also the region, its customers and sub-contractors and all the French people that the yard's exceptional skills will remain in France," he said.

Le Maire estimated the cost of the operation to the state at "around 80 million euros" (US$93 million) and said it would be recouped when Paris reached an agreement with Fincantieri on splitting ownership.

France has been pushing for a 50-50 split between Fincantieri and STX's French shareholders - a proposal rebuffed by Italy.

In April, then French president Francois Hollande had approved the sale of the shipyard by South Korea's STX Shipbuilding.

The deal gave Fincantieri a controlling stake in the facility in return for which Fincantieri gave guarantees on jobs.

But on taking office in May centrist Macron said he wanted to renegotiate the deal.

In a joint statement Thursday, Italy's finance and economic development ministers said: "We consider that the French government's decision not to honour agreements is serious and inexplicable."

Le Maire denied that the nationalisation sent a protectionist message that contradicted Macron's campaign promise to defend free trade.

"I don't think that the message sent is one of being closed. I think it's a signal of our desire to defend our strategic interests" he said, adding he was hopeful of reaching a deal with Italy "in the coming weeks."</s>PARIS, July 27 (Reuters) - The French government has decided to nationalise the STX France shipyard in an ownership standoff with Italy, Le Monde newspaper reported on Thursday.

The Economy Ministry would not comment on the report when asked by Reuters, but said it would hold a news conference on the subject at 3:00 pm (1300 GMT).

Economy Minister Bruno Le Maire had given the Italians until Thursday to accept an offer for 50/50 ownership of the shipyard, brandishing the threat of a temporary nationalisation to buy time to find another solution if the offer were rebuffed.

"The aim is not to nationalise Saint-Nazaire, but we have to temporarily," Le Monde reported a source close to the matter as saying.

Italian state-owned shipbuilder Fincantieri FCT.MI agreed in May to pay 79.5 million euros ($93.20 million) for two-thirds of STX France, which is being sold following the collapse of South Korean parent STX, but the Italian bid has raised fears about French jobs at the Saint-Nazaire site on the Atlantic Coast.

The French government is also concerned about the yard's strategic defence importance. (Reporting by Leigh Thomas; Addtional reporting by Myriam Rivet; Editing by Andrew Callus)</s>Paris, July 28 - Economy Minister Pier Carlo Padoan has described the French government's decision to exercise pre-emption rights on the stock of the STX shipyard to prevent a takeover by Italy's Fincantieri as "unacceptable". In an interview with daily newspaper Les Echos, Padoan said the move suggested there was a "lack of trust in Italian partners". "I take note with regret of the fact that agreements with the previous French government have been repudiated by the new one," he continued. "Frankly, we don't understand why". French Economy Minister Bruno Le Maire announced the move on Thursday after State-controlled Italian company rejected Paris's call to divide STX's capital 50-50. Fincantieri agreed earlier this year to buy 66.6% of STX France from South Korea's STX Offshore and Shipbuilding in a deal approved by the former administration of François Hollande.
France nationalises the STX Europe-owned Chantiers de l'Atlantique shipyard in Saint-Nazaire, Pays de la Loire, to prevent Italian shipbuilding firm Fincantieri taking majority control. Italian Minister of Economy and Finances Pier Carlo Padoan calls the French decision to nationalise the shipyard "grave and incomprehensible".