MILAN Telecom Italia SpA (TLIT.MI) Chairman Franco Bernabe will seek permission to deepen talks with the Hong Kong-based conglomerate said to be targeting 29.9 percent of the company, sources familiar with the situation said.
Bernabe, at the helm of Italy's biggest phone group since Spanish competitor Telefonica (TEF.MC) and three Italian investors took control in 2007, is under pressure from shareholders to deliver a strategy that can lift the company's shares from current near-record laws.
Sources familiar with the negotiations told Reuters on Wednesday that Hong Kong-based Hutchison Whampoa 0013.HK was looking to buy out three Italian investors in Telecom Italia's parent company, called Telco, and swap its mobile business 3 Italia for shares in Telecom Italia.
"Bernabe will seek to win a mandate (from the group's board) to allow him to negotiate (with Hutchison)," a source familiar with Telecom Italia's management told Reuters.
Shareholders said, however, they have not yet received any details of the proposed offer.
Telco, which owns 22.4 percent in Telecom Italia and controls the board, said in a statement late on Tuesday it had had no contacts with Hutchison over a possible deal.
"There have been no contacts of any nature, not even on an informal basis, with the Hutchison Whampoa group nor with Telecom Italia and no documents exchange occurred on the matter," Telco said.
Telecom Italia had no immediate comment. No-one at Hutchison Whampoa could immediately be reached for comment.
Telefonica owns 46.2 percent of Telco. Insurer Generali (GASI.MI) owns 30.6 percent and banks IntesaSanpaolo (ISP.MI) and Mediobanca (MDBI.MI) own 11.6 percent each.
The board of Telco is meeting later on Wednesday ahead of the key Telecom Italia board meeting the following day.
Italian investor Marco Fossati, who owns 5 percent in Telecom Italia, told daily Il Sole 24 Ore he also had had no contacts with Hutchison.
"Nobody contacted me. I am happy to see that everybody wants my shares now. But I read about it in the media," Fossati said.
According to sources familiar with the talks, Hutchison may offer to buy out Italian investors in Telecom Italia at a price close to book value of 1.2 euros a share.
Analysts value 3 Italia at between 1.5 billion euros and 2 billion.
"I don't know the details, but from what I read the multiples that are circulating are unrealistic," Fossati said.
"If we value 3 Italia (at) six times its core earnings (EBITDA), then also Telecom must be valued six times EBITDA, and the result is not 1.2 euro per share but much more," he said.
Fossati said he considered Hutchison's interest as a tactic to increase its share of the Italian mobile market, as the deal would reduce the number of players to three from four.
"I am not saying that the idea should not be considered, on the contrary it is necessary for Telecom Italia to look at it," Fossati said. "But first of all there must be an economic and industrial convenience for the company. Then, if the price is right, why not?", he said.
Fossati was not immediately reachable for comment.
Shares in Telecom Italia were down 1.3 percent at 0.5885 euros by 0925 GMT, not far from a trough of 0.5320 set last week. ($1 = 0.7658 euros)
(Additional reporting by Antonella Ciancio in Milan and Denny Thomas in Hong Kong; Editing by David Holmes)