Olivetti’s bid for Telecom Italia gets regulator’s green signal

ROME, Feb 28: Italy's bourse watchdog on Saturday gave the green light to Olivetti's rejigged $58 billion hostile bid for Telecom Italia,...

ROME, Feb 28: Italy’s bourse watchdog on Saturday gave the green light to Olivetti’s rejigged $58 billion hostile bid for Telecom Italia, dealing a bitter blow to the reluctant takeover target.

Olivetti had revamped its initial David-and-Goliath bid for the world’s 11th-biggest telecom group after watchdog Consob declared it incomplete and invalid. But the regulator gave its blessing to the reworked plan, submitted by former typewriter maker Olivetti two days ago, saying the offer — the biggest in Italian corporate history must be launched by the end of April."In the opinion of (Consob), Olivetti’s submission gives the market the necessary information on the offer; therefore the offer period’ can be said to have begun on February 25, 1999," the bourse regulator said in its statement. Telecom, which was formulating an attack strategy to defend itself, now has its hands tied. Corporate governance laws prohibit it from taking any action which could stymie the offer.

A spokesman said Telecom, which hadslammed the new offer as "seriously full of holes", had no comment on Consob’s verdict. The offer must begin by the end of April, Consob said, adding:. "Any postponement would imply a change in the conditions of the bid…and so the offer itself would lapse, relieving the takeover target of its obligations".

Takeover defences can be mulled by the Telecom board, but they must be approved by the holders of 30 per cent of the group’s capital a tall order for a company with an estimated 1.5 million shareholders. Consob delivered its ruling after lengthy deliberation. It met for four hours on Friday before adjourning until Saturday, when it pored over the new bid for another five hours.

Olivetti’s rehashed bid left unchanged the cash-paper offer price of 10 euros per share but proposed a five trillion lire ($2.85 billion) capital increase and announced a stronger deal to sell telecom stakes to Germany’s Mannesmann.

Consob’s decision crowned an electrifying week which began when Olivetti first unveiled itsproposed cash, share and bond offer last weekend in a bold move that sent shockwaves through the clubby corridors of Italian capitalism.

The week has seen a flurry of board meetings, backroom diplomacy, legal wrangling and stock market gyrations. Telecom was privatised in late 1997 and the government retains a golden share, though it has said it will remain neutral in a takeover tussle that pits a once-struggling typewriter maker against a monolith five times its size.

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Facing off are Olivetti Managing Director Roberto Colaninno, architect of the bid, and his opposite number at Telecom, seasoned corporate battler Franco Bernabe.Telecom said on Thursday it would study a merger with 60 per cent owned mobile phone unit TIM, a move that could put it out of Olivetti’s reach, and is also working on divesting non-core activities. "I don’t have poison pills up my sleeve against the takeover bid," Bernabe was quoted on Saturday as telling daily Il Sole 24 Ore. "But I have a plan: to increase the value of thecompany."

Olivetti on Saturday firmly denied it was in talks to enter the shareholding hard core’ of Telecom Italia, a grouping of big banks, insurers and the powerful Agnelli family given almost seven per cent of Telecom capital when it was privatised.Newspapers said behind-the-scenes diplomacy had thrashed out the strategy that would thereby allow Colaninno to scale down his ambitions but still play a decisive role in Telecom.