May 2, 2019 / 8:08 AM / 3 months ago

Blackstone pursuing RCS owner for up to $600 million over HQ sale: source

MILAN (Reuters) - Blackstone Group is seeking up to $600 million in damages from the chairman and controlling shareholder of Italian publisher RCS Mediagroup over a disputed property sale, a source close to the fund said on Thursday.

FILE PHOTO: RCS MediaGroup S.p.A. logo is seen on top of the headquarters in Milan, Italy, April 7, 2016. REUTERS/Stefano Rellandini/File Photo

In a lawsuit filed in New York on April 22, which was seen by Reuters, the U.S. private equity firm is suing RCS Chairman Urbano Cairo over the issue.

The move comes on top of a lawsuit filed by Blackstone against RCS last November which was put on hold on April 24 pending the outcome of arbitration in Italy.

“The complaint against Cairo seeks compensatory damages of up to $300 million for lost opportunities for Blackstone and its investors to sell the properties, as well as comparable punitive damages in an equal amount,” the source said.

Asked about the lawsuit against him on the sidelines of RCS’ annual general meeting on Thursday, Cairo said he could not comment as he had no direct information on the matter.

The case centres on RCS’ historic headquarters in central Milan, which Blackstone bought from RCS for 120 million euros ($134 million) in 2013.

Cairo has said Blackstone bought the properties at too low a price when RCS faced financial difficulties, and the transaction should be declared void.

The publisher, owner of influential daily Corriere della Sera, launched arbitration proceedings under Italian law in November to annul the sale.

Blackstone has in turn accused RCS of falsely claiming that it still owns the property and said the publisher improperly blocked it from selling it to Germany’s Allianz last summer, according to the two U.S. filings.

“The decision to proceed with an arbitration was taken by the board,” Cairo said. “It was something that could not be helped after the due diligence analysis.”

The private equity firm says in the latest complaint that it suffered damages as a result of Cairo’s alleged “intentional interference with (Blackstone’s) prospective business relations in an amount to be proven at trial”.

Cairo said that RCS had told Blackstone that the valuation of the assets was too low long before news of the sale to Allianz emerged.

“We informed Blackstone in writing in March last year,” he said on Thursday.

RCS’ board has decided against setting aside funds to cover legal risks related to the dispute, a financial document published on Thursday showed.

Cairo, who started off by selling advertising for the media group of former Prime Minister Silvio Berlusconi and went on to build his own media empire, took control of RCS in 2016 after a hostile takeover that pitted him against Italy’s business elite.

Famous for his cost-cutting abilities, Cairo has been able to turn RCS around without job losses.

Editing by Keith Weir, Kirsten Donovan and Alexander Smith

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