Thanks Greg B.
All,
Hmmmm. A small fish is biting a shark. WCOM style in Euope.
Olivetti Offers EU52.6 Billion for Telecom Italia; Plans to Sell Omnitel
Rome, Feb. 20 (Bloomberg) -- Olivetti SpA, Italy's No. 2
phone company, said it offered 52.6 billion euros ($59 billion)
in cash, stock and bonds for its bigger rival Telecom Italia SpA
in what would be the largest ever takeover in Europe.
Olivetti will pay 10 euros a share for Telecom Italia's
common stock, a 10.5 percent premium on Friday's closing price.
The offer, made through its Tecnost SpA unit, includes 6 euros in
cash, 2.6 euros in bonds and 1.4 euros in shares. Olivetti will
also sell its existing phone businesses due to antitrust laws.
The first hostile takeover attempt for one of Europe's
former state telephone monopolies, the bid would turn Olivetti, a
newcomer to the industry, into one of its top ten companies. The
offer was timed to pre-empt a counter-move from Telecom Italia,
whose board is meeting to seek a way to block the bid.
''This bid is a financial bomb introducing changes we
couldn't even imagine before and bringing the American-style
culture of takeovers to the cozy Italian market,'' said Patrizio
Pazzaglia, who manages $90 million at Nusa SIM in Rome.
Olivetti, whose market value is seven times smaller than
Telecom Italia's, said it will sell its existing phone businesses
to Germany's No. 2 phone company Mannesmann AG. The sale, which
would quell antitrust concerns and finance the Telecom Italia
acquisition, could take place even before the takeover is
completed, the company said.
Joint Ventures
Olivetti owns 50.1 percent of a joint venture with
Mannesmann that controls Europe's No. 2 mobile phone company,
Omnitel Pronto Italia SpA, and Italian fixed-line phone company
Infostrada SpA.
The takeover bid, initially scheduled to be discussed at
Olivetti's board meeting Sunday afternoon, was made just half an
hour before Telecom Italia's board started a meeting on Saturday
to discuss counter-moves, such as merging with its Telecom Italia
Mobile SpA cellular unit.
''Now the ball is in Telecom Italia's court,'' said Roberto
Odierna, an analyst at Societe Generale in Milan. He said that
Telecom Italia could respond by bidding for Olivetti.
Olivetti said it intends to sell part of Telecom Italia's 60
percent stake in TIM, while keeping ''direct control'' over the
cellular company, if its bid succeeds.
''At this point, Olivetti becomes a completely different
company, to which we'll have to apply completely different
valuations,'' said Paola Toschi, an analyst at AFV Milla SIM.
The five-year Tecnost bonds offered as part of the purchase
will have an investment grade rating from an international agency
and will be backed by Olivetti. The yield will be similar to
comparable bonds, the company said.
Italian Lottery
The shares that will be offered as part of the purchase will
come from a share sale by Tecnost, a separately traded Olivetti
unit that makes equipment for lotteries. Olivetti said it will
keep at least 55 percent of Tecnost.
''The price seems to be rather low, and I have doubts they
will be able to pull it off,'' said Alessandra Cantu, an analyst
at Banca Commerciale Italiana. ''It would be simpler for Telecom
Italia or TIM to make a counter-bid for Olivetti.''
Olivetti said it will secure guarantees from Italian and
foreign banks for the entire amount of the offer, which
specifically excludes U.S. residents and needs 67 percent
acceptance to succeed. The company isn't offering to buy Telecom
Italia's non-voting savings shares.
Olivetti is being advised by Lehman Brothers Inc.,
Mediobanca SpA, Chase Manhattan Bank and Donaldson, Lufkin &
Jenrette.
The takeover plan is made possible by the opening of
Europe's telecommunications market to competition last year, a
change that allowed new phone companies like Olivetti and
Mannesmann to challenge former monopolies such as Telecom Italia
and Germany's Deutsche Telekom AG.
Telecom Italia's Chief Executive Franco Bernabe, appointed
only last November, may try to counterattack by bringing in a
foreign ally like AT&T Corp. or British Telecommunications Plc,
Pazzaglia said.
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