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Olivetti to press TI bid
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April 21, 1999: 8:15 a.m. ET
Italian bidder pursues offer as cracks appear in Deutsche Telekom link
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LONDON (CNNfn) - Olivetti plans to launch its formal takeover offer for Telecom Italia Friday in a bid to head off TI's proposed mega-merger with Deutsche Telekom, a source close to Olivetti told CNNfn.com Wednesday.
Olivetti's move came as the first cracks appeared in Telecom Italia's planned merger with Deutsche Telekom, which was approved by the Italian company's board Tuesday and would create one of the world's largest telephone companies.
After TI's board approved the deal with Deutsche Telekom, which could be the biggest merger in corporate history, the two sides started a tit-for-tat exchange over possible conditions attached to the deal, estimated to be worth more than $95 billion.
The Italian government had called on its German counterpart to accelerate the sale of its 74 percent stake in Deutsche and for limits on German voting rights in seeking what is described as "a merger of equals."
But Bonn quickly rebuffed any limits on its voting rights. "We hold shares and we see no reason at this time to limit these," a German finance ministry official told Reuters.
TI's board is meeting again Wednesday but said it had made no decision on the precise terms of the proposed stock swap deal after Italy's stock market regulator requested a statement.
This followed reports that the initial merger plan called for an exchange of three TI shares for each Deutsche share, a 25 percent premium above Olivetti's 11.5-euro-a-share offer at Wednesday's prices.
A senior member of the financial team advising Olivetti did not rule out increasing its offer if a bidding war breaks out with Deutsche, which has yet to divulge the terms of its proposed merger plan.
Olivetti's advisers broke the silence maintained since the German giant emerged as TI's white knight last week to slam what they called the "smoke screen" surrounding the proposed merger with Deutsche, saying it should be left to shareholders to decide on the industrial logic and terms of its offer.
"What we want is to be able to put our offer to shareholders without any limitations or smoke screen," said a senior Olivetti adviser in Milan who asked not to be named.
He said the 22.5 billion euro ($23.9 billion) loan to finance the bid remained in place and 15 billion euro bond issue was close to completion. "The money is there and the offer will be out by the end of the month," said the source, noting that the prospectus had to be out at least five days before on April 25.
The source said Olivetti management was "confused" about the logic of Deutsche Telekom's intervention given perceptions of a poor strategic fit between the German firm and TI. "It's impossible to know how detailed their plans are," said the source. "It all sounds much more real than it actually is."
'Monster' regulatory issues
Admitting that Olivetti's own offer faces "fairly big regulatory issues," the adviser described the regulatory situation for the Deutsche Telekom/TI merger as a "monster."
He said the conditions attached to Olivetti's original, informal offer first outlined in February remained, though Deutsche Telekom's involvement removed the two major obstacles - a planned share swap and the buyout of TI's remaining stake in cellular arm TIM.
Stock in Turin-based Olivetti jumped more than 3 percent to 2.97 euros.
Telecom Italia stock gained 2 percent to 9.99 euros in Milan, after returning from a two-day suspension.
Deutsche Telekom (FDTK) stock slipped 2 percent to 35.10 euros in Frankfurt.
-- from staff and wire reports
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