| ||
| ||
| ||
 |
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Italian merger 'grossly unfair'
MILAN, Reuters (Reuters) -- Telecom Italia and its parent Olivetti on Wednesday unveiled a plan to merge and cut the long chain of control over the group, but the restructuring was immediately met by howls of protest from some investors. Debt-heavy Olivetti said it would offer seven shares for each share in Telecom Italia, a strong cash generator. That was line with market values but was the kind of ratio that at least one fund has said it would challenge. In an attempted sweetener, Olivetti said it would buy back some Telecom Italia shares at a 20 percent premium but only after offering to buy back Olivetti shares, which would use up the first spoils of a new nine billion-euro credit line. Presenting the merger to analysts, Telecom Italia Chairman Marco Tronchetti Provera faced a barrage of hostile questions from fund representatives who said the deal had been worked out to suit his needs and that the market values used in the merger had been distorted by expectations of the deal. "What we're doing is in the interest of all shareholders. We are fully comfortable with it,'' said Tronchetti Provera, who also incurred investors' ire in 2001 when a big premium was paid to a small group of shareholders to grab control of Olivetti. Dresdner Kleinwort Wasserstein cut its recommendation on Olivetti, Telecom Italia and its mobile arm TIM to "hold'' from "buy,'' saying the merger terms were "grossly unfair to minority investors'' despite promises of fair treatment. Shares in most firms related to Telecom Italia remained suspended for a third day on Wednesday but TIM was down 4.6 percent against a 1.6 percent fall European telecoms stocks. Shares in Telecom Italia, Olivetti, Pirelli and related stocks were due to reopen at 1330 GMT, and pre-opening prices suggested Telecom Italia was in for a heavy fall. Tronchetti Provera warned there would be ``turbulence in the near term.'' Giulio Brunetta, a fund manager with Alpe Adria Gestioni, said the merger was roughly in line with analysts' expectations. "The chain-cutting is very important. Many U.S. funds have refused to invest in TI because of the complex shareholding and clarifying it will open it up to many more investors,'' he said. OLIVETTI OUTLOOKStandard & Poor's said it would upgrade Olivetti's debt but had lowered Telecom Italia's outlook to stable from positive. Telecom Italia's 6.25 percent bond due February 2012 was bid at 201.8 basis points over government debt, 14 basis points wider on the day. The telecom operator's debt has fallen in value as concerns about the merger rattled around. As well as the nine billion-euro credit line, Telecom Italia agreed a 6.5 billion euro refinancing of debt that is due to mature in the next 18 months. The newly merged group would have debts of 40 billion euros in 2003 compared with Telecom Italia's roughly 18 billion euros now, the companies said, adding the debt would fall to 34 billion euros next year, helped by further non-core asset sales. Tronchetti Provera said the directories unit of media arm Seat Pagine Gialle -- which he valued at about 4.5 billion euros -- would be sold. Despite the higher debt, the groups said dividends should be at least in line with Telecom Italia's recent payouts. The group would also gain tax benefits worth four billion euros after Olivetti wrote down its stake in Telecom Italia, which in turn wrote down its holding Seat Pagine Gialle. Further up the control chain, tyres-to-cables maker Pirelli would merge with its parent Pirelli & C. Pirelli & C. would swap four new shares for every three Pirelli ordinary shares and 10 new savings shares for seven Pirelli savings shares, the companies said. Pirelli & C. is also planning a one billion euro capital increase with free warrants worth 250 million euros. CHAINED UPTronchetti Provera, who is also Pirelli's chairman, has been seeking ways to simplify the chain of control since took the helm at Olivetti via holding Olimpia. Olimpia owns about 28 percent of Olivetti which holds 55 percent of Telecom Italia. The arrangement has been criticised for a lack of transparency and concerns about moves to cut the chain have weighed on Telecom Italia stock which lost 18 percent this year. Tronchetti Provera's dilemma has been how to avoid over-diluting Olimpia's stake in Telecom Italia-Olivetti while at the same time avoiding a rebellion by minority investors. Olimpia would end up with a stake of between 14 and 15 percent in the new, enlarged Telecom Italia and Tronchetti Provera said it would not raise new cash to bump up its holding. The merger plan must be approved at an extraordinary shareholders' meeting due in May and will need to be approved by at least two thirds of investors attending. British hedge fund Liverpool Limited Partnership, which campaigns in the name of minority shareholders, warned on Monday it would fight any move that left investors short-changed.
|
|
|||||||||||||||||||||||||||||||||||||||||||||
|
|
