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Olivetti faces $100M bill
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April 7, 1999: 12:05 p.m. ET
Advisors' fees mount up for telecom predator as banks make the real killing
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LONDON (CNNfn) - Italian telecom predator Olivetti has racked up fees of more than $100 million in its hostile $65 billion pursuit of Telecom Italia, according to reports Wednesday.
Olivetti's highly-leveraged bid hinges on a 30.5 billion euro ($32.8 billion) finance package, the largest-ever European corporate loan. Bank and legal fees to arrange the loan and formulate the Telecom Italia (TI) bid already are draining Olivetti's finances.
The scale of the fees matches the $90 million Exxon (XON) paid advisors during its planned takeover of Mobil (MOB) and revealed in an SEC filing Tuesday. BP Amoco (BPA) reportedly paid $100 million in fees during its successful bid for Atlantic Richfield (ARC).
Olivetti surprised the markets by securing commitments to its massive loan in just three weeks with arrangers Chase, DLJ, Lehman Brothers and Mediobanca.
Telecom Italia plans to launch its own 20 billion euro loan as part of its defense strategy, and it appears to have cut a better deal with the bankers.
The Olivetti arrangers were joined by 21 other banks that have been asked to underwrite 1 billion euros each, according to a report in Euroweek, a capital markets journal.
Olivetti's three-year deal carries a margin of 1.75 percent over Libor, the rate at which banks lend to each other. The TI loan carries a margin of just 0.8 percent over Libor.
Banks in the Olivetti deal are expected to receive $15 million as a kill fee for committing to the loan.
Around 10 banks have joined both deals according to the report, hedging their risk by guaranteeing that they will be on the winning side. "If TI beats back the takeover by increasing its own value...and we have joined both deals, we still stand to reap the Olivetti kill fee and earn on the TI deal," one arranger told Euroweek.
TI's loan is being arranged by Credit Suisse First Boston, JP Morgan and San Paolo-IMI. 
-- from staff and wire reports
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