* Govt says sale of transportation activities is essential
* Finmeccanica aims to sell assets in shortest time possible
* Shares rise more than 2 percent (Adds comments from CEO and analysts, background, share price)
By Danilo Masoni
MILAN, March 20 (Reuters) - The Italian government led by Matteo Renzi has endorsed plans by state-owned Finmeccanica to sell its rail assets, raising hopes that a deal to help the group focus on its more profitable aerospace and defence businesses may be closer.
Finmeccanica put up for sale its loss-making unit AnsaldoBreda, a train maker, and its stake in rail signalling firm Ansaldo STS more than two years ago to cut a heavy debt pile accumulated under a previous management.
But opposition from politicians and trade unions to foreign takeovers as well as a management reshuffle after a corruption scandal delayed the process, prompting rating agencies to cut the group’s 3.3 billion euros ($4.6 billion) net debt to junk.
Finmeccanica’s decision to sell its rail assets was an essential element for the success of the group’s plans, the finance and industry ministries said in a joint statement on Wednesday.
The much-awaited endorsement comes only one month after a new government led by centre-left leader Renzi took power. Finmeccanica is 30 percent owned by the Italian state and needs its backing for sensitive strategic issues like disposals.
Finmeccanica CEO Alessandro Pansa said he was upbeat about the sale of the group’s transportation units but declined to give more details because of the sensitivity of the issue.
“We want to be successful in the shortest possible period of time, we believe we can strike a deal, but this is the only thing I can say,” Pansa told analysts on Thursday during a conference call following the release of the group’s results.
Finmeccanica said on Wednesday it had posted its first profit in three years in 2013, as it reaped the fruits of a restructuring. But losses at AnsaldoBreda contributed to a 5.7 percent drop in core earnings to 949 million euros.
Selling AnsaldoBreda would eliminate a source of cash absorption, while the group’s 40 percent stake in profitable STS is worth around 600 million euros at current market prices.
U.S. industrial giant General Electric, Chinese companies China Cnr Corporation and Insigma , and Japan’s Hitachi, have expressed interest in the assets.
Among possible contenders are France’s Thales and Canada-based Bombardier, said a source close to the matter. Thales and Bombardier were not immediately available for comment.
Shares in Finmeccanica rose 2.5 percent at 1129 GMT, outperforming a weaker Italian market.
“It seems the Italian government has given its go-ahead for the sale of the transportation assets, that’s good news,” Banca Akros analyst Gabriele Gambarova said in a note.
In its statement, the Italian ministries said the sale could involve Italian institutional investors.
$1 = 0.7189 Euros Additional reporting by Dominique Rodriguez in Paris, Editing by Lisa Jucca and Stephen Powell