Telefonica wins battle for control of Telecom Italia
Monday, 30 April 2007
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Telefonica, Europe's second-largest telecoms company, has won the protracted and bitter race for control of Telecom Italia. The Spanish company has teamed up with a consortium of Italian banks, agreeing to pay €4.1bn (£2.8bn) for an 18 per cent controlling stake in Telecom Italia.
The group is buying Olimpia, the investment vehicle that controls the Telecom Italia board, which is jointly owned by Pirelli, the tyre manufacturer, and the Benetton family. Under the deal, announced to the Italian stock market late on Saturday, both Pirelli and the Benettons will retain a stake in Telecom Italia. That, together with the Italian members of the Telefonica consortium, has been enough to win the approval of the Italian government, which opposed the prospect of Telecom Italia falling into foreign hands.
Pirelli announced last year that it was keen to sell part or all of its stake. The American company AT&T was initially favourite to win control of Telecom Italia, but its bid was damaged by the intervention of the Italian government in the deal.
The Italian Prime Minister, Romano Prodi, has repeatedly called for Telecom Italia to remain in the ownership of Italians, and has even become involved in talks concerning the company's future.
Last month, AT&T withdrew its offer for a stake in Olimpia, and the opposition of the Italian government also seems to have scuppered a bid from America Movil, the telecoms giant controlled by the Mexican billionaire Carlos Slim.
One effect of the political row in Italy is that Telefonica has been able to pay less than expected for control of Telecom Italia. The Spanish company had been expected to pay up to €3 per share, but the deal values its investment at €2.82 per share.
Foreign investors in Italy have found it difficult to buy stakes in local companies because of political opposition. Last year, the Spanish infrastructure company Abertis cancelled plans for a merger with its Italian rival Autostrade after the Italian government opposed the deal.
