Deutsche Telekom Seen Bidding as Much as US$107 Billion for Telecom
Italia
DT May Offer Up to $107 Bln for TI, People Familiar (Repeat)
(Adds detail from Die Welt in 9th paragraph, changes dateline)
Rome, April 18 (Bloomberg) -- Deutsche Telekom AG, Europe's
biggest phone company, is considering paying as much as 100
billion euros ($107 billion) for Telecom Italia SpA, exceeding
Olivetti SpA's hostile offer for Italy's largest phone company,
people familiar with Telecom Italia said.
The offer by Germany's state-controlled company may include
Telecom Italia's non-voting savings shares and all of its
cellular unit. That would be in addition to 12 euros for each
common share, which the Financial Times reported yesterday, the
people said. Olivetti's $65 billion offer only includes common
shares, at 11.5 euros each.
Deutsche Telekom, Telecom Italia and Olivetti declined to
comment. The Italian government, which confirmed the two
companies were in talks, said any linkup should be a ''merger of
equals'' and that the Germany government must sell its 72
percent stake in Deutsche Telekom.
''If such a plan is on the table, Olivetti may well raise
its own offer,'' said Luca Mori, who helps manage 300 million
euros in Italian shares at Fondicri in Rome. ''Whether investors
will go with Deutsche Telekom depends on how valid is the
business plan for integrating the two companies.''
The German company's offer, which would create the world's
biggest phone company with a market value of about 200 billion
euros, is expected a few days after Telecom Italia's board meets
Monday, the people said. It may prompt Olivetti to raise its bid
for a second time by bringing in a partner such as Bell Atlantic
Corp., analysts said.
This is the latest twist in a two-month battle between
Telecom Italia and Olivetti, which is seven times smaller than
its prey. Speculation that Telecom Italia would try to arrange a
higher rival bid intensified after the company failed a week ago
to win shareholder support for a plan to thwart Olivetti's bid.
The Italy government is trying rally support with its
German counterpart and the companies to reach a compromise
solution that would involve Olivetti buying a large stake in
Telecom Italia and becoming one of the top shareholders in a
merged German-Italian company, a government official said,
adding that still other scenarios are possible.
Olivetti's involvement may require Telecom Italia Chief
Executive Franco Bernabe leaving his current job in June to run
state electric utility Enel SpA, newspaper la Repubblica said.
While Deutsche Telekom is interested, it hasn't yet made a
decision on merging with Telecom Italia, the German daily Die
Welt reported.
Top Talk
Italian Prime Minister Massimo D'Alema spoke with German
Chancellor Gerhard Schroeder about a possible merger Friday.
This would be the second time European governments arranged a
merger of their phone companies. Sweden and Norway earlier this
year agreed to merge their Telia AB and Telenor AS.
Consob, Italy's market regulator, demanded Telecom Italia
make a statement to the market about its intentions regarding a
merger with Deutsche Telekom today.
While most of Olivetti's bid is made up of cash and bonds,
the bulk of Deutsche Telekom's offer is likely to be in stock,
making the company's business outlook more important, said Paola
Toschi, an analyst at AFV-Milla SIM in Milan.
Apart from the German government, which effectively runs
Deutsche Telekom, and the Italian government, which owns a 3.4
percent stake and can block changes in Telecom Italia ownership,
the link-up would also have to be approved by the European
Commission.
The Commission's President-designate, Romano Prodi, already
said that a Telecom Italia-Deutsche Telekom merger would be
''very positive'' as long as it's based on ''parity'' between
the two giants. Prodi oversaw Telecom Italia's sale to private
investors as Italian prime minister in 1997.
Stiff Competition
Since European phone markets were deregulated last year,
Deutsche Telekom has faced the region's stiffest competition at
home. Buying Telecom Italia would give it access to Europe's
biggest cellular phone company, Telecom Italia Mobile SpA, and
to Telecom Italia's operations in Latin America.
''Telecom Italia could bring its cellular experience and
vast presence in Latin America to the new company, while
Deutsche Telekom is strong in fixed-line and in Asia,'' said AFV-
Milla's Toschi.
The bid would also end Deutsche Telekom's existing alliance
with France Telecom SA and Sprint Corp., analysts said.
Bernabe had planned to buy out TIM minorities for 23
billion euros and convert non-voting savings shares as part of
his defense plan against Olivetti. That plan had to be shelved
after he couldn't get the required quorum at a shareholders
meeting a week ago.
Since Bernabe lost that battle, numerous reports have
surfaced about how else he may defend his company. With
Olivetti's bid set to be in place before the end of the month,
Bernabe is running out of time.
Deutsche Telekom this week said it will sell shares worth
up to $12 billion to fund acquisition abroad. That prompted a
report in Germany newspaper Die Welt yesterday that it is also
in ''advanced talks'' to acquire Cable & Wireless Plc of the
U.K. Today, the paper said Telekom is considering raising
additional funds through a bond sale.
Stumbling Blocks
The Italian government's insistence on the German state
selling its Deutsche Telekom stake within a few years, and
limiting its voting rights in the company right away, could be
one of the main stumbling blocks for an agreement.
''Telecom Italia is completely privatized now, and there is
no going back,'' Italian Treasury Minister Carlo Azeglio Ciampi
said today. Indicating his support, Ciampi said a Deutsche
Telekom merger would be ''of great interest.'' German Finance
Minister Hans Eichel declined to comment on the talks.
Telecom Italia is advised by Credit Suisse First Boston,
J.P. Morgan & Co., Lazard Vitale & Borghesi and Banca IMI SpA.
Bernabe handled most of the talks with Deutsche Telekom Chief
Executive Ron Sommer directly, without involving the investment
banks, the people familiar said.
Deutsche Telekom is being advised by Goldman Sachs Group
Inc., the International Finance Review reported. |
