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Rome threatens Italia deal
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April 23, 1999: 10:48 a.m. ET
Italy may pull plug on telecom merger; Olivetti makes formal bid
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LONDON (CNNfn) - Italian politicians were threatening to sink Telecom italia's $82 billion merger Friday unless their German counterparts submit a detailed plan to dispose of the state's 72 percent stake in Deutsche Telekom.
The latest objections came from public works minister Enrico Micheli, who stressed that the government will block any deal joining Telecom Italia and Deutsche unless the latter is taken out of state control.
"A very strong national interest is at play. The operation makes sense only if it is a market operation between two public companies and if it is truly equal," Reuters reported Micheli as saying.
The latest shot from Rome follows warnings from other prominent politicians that they are unhappy with assurances received so far from the German Finance Ministry that it won't interfere with the running of any merged entity.
So far, Prime Minister Massimo D'Alema, Treasury Minister Carlo Azeglio Ciampi and Finance Minister Vincenzo Visco have voiced their concerns about control. Rome also is pushing for assurances that the deal truly will be a "merger of equals."
"Telecom Italia is too important for the country to allow it to be bought," Micheli added.
Golden share
The Italian government could pull the plug on any deal, because it still holds a so-called golden share in TI.
Despite owning only 3.4 percent of TI, Rome retains the right to veto any strategic decisions made by the company. Such arrangements are commonplace among listed, former state-run companies in Europe.
The discomfort in the TI camp was welcomed by Olivetti's advisers as the rival bidder formally published the prospectus for its 11.5 euro-a-share offer Friday.
Olivetti bid on the Internet
Olivetti's plan was cleared by the European Commission and Italian stock market regulator Thursday and released on the Internet. The offer opens April 30 and runs through May 15.
"A lot more people are looking at the Olivetti offer," claimed one adviser. He rejected suggestions that TI's sluggish share price reflected a perception that Olivetti's bid has little chance of success. "The share price reflects particularly badly on [TI CEO] Bernabe," maintained the adviser.
TI's shares were up 1.6 percent in Milan at 9.96 euros, while Deutsche was 0.10 euro lower at 35.20 euros in Frankfurt.
The adviser was scathing of the TI-Deutsche plan: "There was a clear lack of substance when they did get everyone sat down. What we're hearing from investors is that it is very difficult to believe that the ownership of TI will not change."
"The all-Italian solution still has broad political support. The real question is how does Deutsche Telekom cope with the embarrassment [if its plan collapses]."
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