Franco Bernabe, the Telecom Italia chairman, said in a statement that the company’s board of directors had received an offer from Hutchison Whampoa, based in Hong Kong, and that a committee of its biggest shareholders would review it.
Hutchison Whampoa, controlled by Li Ka-shing, the richest person in Hong Kong, owns 3 Italia, one of the four biggest telecom operators in Italy.
Telecom Italia, with €28.3 billion, or $36.8 billion, in debt, has been looking for new investors to finance the needed expansion of its high-speed Long Term Evolution mobile network, which is available only in the country’s major cities.
Italy’s flagship carrier is at present controlled by a shareholder group led by Telefónica, the Spanish carrier group, which holds a 22.4 percent controlling stake as part of a group of Italian investors. Miguel Garzón, a spokesman for Telefónica in Madrid, said the company declined to comment on the offer.
Telecom Italia said the exploratory committee would be made up of Mr. Bernabe and senior representatives from Telefónica and its investment partners, Intesa Sanpaolo, the largest domestic bank in Italy, and Assicurazioni Generali, the largest insurer.
A person with knowledge of the offer who was not authorized to disclose details, said Hutchison Whampoa was offering to merge 3 Italia, which has an estimated value of €1.5 billion, with Telecom Italia in return for Telecom Italia shares.
The Hong Kong company would then purchase additional shares from Intesa Sanpaolo and Assicurazioni General at €1.20 each, roughly double Telecom Italia’s current share price, giving Hutchison Whampoa a 29.9 percent stake in Telecom Italia, just shy of the 30 percent threshold that would force it to make the same offer to all shareholders.
The deal would give Hutchison Whampoa, which also owns mobile carriers under the 3 brand in Britain, Sweden, Denmark, Austria and Ireland, as well as in Asia, control of one of the largest European operators and a foothold in Latin America. There, Telecom Italia owns a controlling stake in TIM Brasil, one of the two biggest mobile operators in Brazil, and a 21 percent stake in Telecom Argentina, that country’s market leader.
But the deal faces major hurdles, most crucially the support of Telefónica. As the biggest single shareholder, Telefónica can effectively veto the deal. It has the first right of refusal to buy shares should its investment partners, Intesa Sanpaolo and Generali, receive another offer for their shares, according to a person with knowledge of the pact, who was not authorized to disclose details of a deal whose terms have not been made public.
Politically, Italy is currently without a permanent government, which could, ironically, help Hutchison Whampoa push through a takeover with only a modicum of political dissent. In 2007, Italian lawmakers resisted overtures from ATT before agreeing to let Telefónica and its Italian partners purchase control of Telecom Italia.
Last year, Naguib Sawiris, an Egyptian mobile investor, made an unsolicited offer to buy a €2 billion stake in Telecom Italia but was turned down by the Telefónica-led investor group.
In what could be a similar signal to the Hong Kong bidder, Telecom Italia said the special committee would also consider the feasibility of legally separating Telecom Italia from its fixed-line network, the country’s largest, and selling only the operator — its brand and customer base — to 3 Italia. Whether that is acceptable to Hutchison Whampoa is unclear.
Hutchison Whampoa did not immediately respond to a request for comment.
Mr. Bernabe, the Telecom Italia chairman, has said that Telecom Italia may consider selling its fixed-line network to reduce debt.
Telecom Italia lost €1.3 billion in 2012, as revenues fell 1.5 percent amid the country’s domestic slowdown.
3 Italia, which had 9.5 million customers at the end of 2012, reported 2012 earnings before interest, taxes, depreciation and amortization of €264 million, as revenues rose 10 percent to €2 billion.
Article source: http://www.nytimes.com/2013/04/12/technology/hong-kong-operator-makes-bid-for-telecom-italia.html?partner=rss&emc=rss