The second act of the European corporate drama between Telecom Italia Spa and Olivetti Spa began last week, cumulating in Olivetti raising the stakes of its hostile takeover bid for Telecom Italia by 15 percent to $65 billion.
The measure was a response to Telecom Italia’s decision to offer cash, instead of stock, to buy Telecom Italia Mobile. The scene unfolded when Telecom Italia announced a proposal to buy out the remaining 40-percent stake in the subsidiary it doesn’t currently own for about $25 billion in cash. The original buyout offer was a stock transaction.
The move essentially raised the stakes in the takeover battle in that it gives TIM investors a better deal. Shareholder approval for the measure must pass by 30 percent. A meeting is to be held to decide the matter this month.
Early last week, Olivetti announced it had secured bank financing well in excess of the amount needed to fund its original offer of $58 billion for all shares of Telecom Italia stock. Olivetti used this excess funding to up the stakes even higher. The new offer is for a total of $65 billion, or $12.34 per share, up from the $11 per share offered in the first salvo.
However, Olivetti suffered somewhat of a setback when Italy’s stock market regulator Consob cried foul after Olivetti sold 24.4 million shares of Telecom Italia stock without informing anyone of the sale. Speculation is the large-volume sale was done to lower Telecom Italia’s stock price, and many analysts now question whether Olivetti has the financial wherewithal to complete the takeover offer. The company has yet to submit an official bid and prospectus.
Meanwhile, Telecom Italia’s Chief Executive Officer Franco Bernabe said the company would strengthen its business outlook by integrating its wireline and wireless networks, focus on developing Internet services and sell off non-core assets. Telecom Italia since has started a road show in the United States to attract fund managers here.
Various news agencies contributed to this report.
