MILAN (Reuters) - Spanish telecom group Telefonica (TEF.MC) is raising its stake in Telecom Italia (TLIT.MI) in a complex deal that strengthens its influence over a key rival in south America, while allowing Italian investor partners to offload an unprofitable bet.
The deal values the Telecom Italia shares indirectly owned by investors Mediobanca (MDBI.MI), Generali (GASI.MI) and Intesa Sanpaolo (ISP.MI) at 1.09 euros apiece, nearly twice current market prices, and ends months of speculation over the future of Telecom Italia.
Under the terms of the deal, Telefonica will raise its stake in Telco, the holding company that controls Telecom Italia, to an initial 66 percent from 46 percent via a 324 million euros ($437 million) capital hike aimed at paying back outstanding debt, the Italian shareholders in Telco said in a statement.
In a second phase Telefonica plans to raise its stake in Telco to 70 percent, equivalent to nearly 16 percent of Telecom Italia, through a second capital increase, and further down the road it will fully buy out its Italian partners.
Shares in Telecom Italia climbed more than 4 percent at the open, and were up 1.8 percent to 0.6 euros by 0730 GMT.
Analysts said the deal would strengthen Telefonica’s grip over Telecom Italia without forcing it into a full takeover bid.
“It’s the same old story,” said Roberto Lottici, a fund manager with Ifigest “It’s good for Telecom Italia since it will strengthen it and it’s good for the Italian shareholders in Telco. But these big deals always go over the heads of the small investors.”
The deal allows Telefonica to boost its influence over Telecom Italia, a direct rival in South America, while preventing the shares held by its Italian partners in Telco from falling into the hands of a rival.
Sources have said that AT&T (T.N) and Egyptian tycoon Naguib Sawiris have made approaches to buy Telecom Italia.
Voting rights held by the Spanish group in Telco will initially remain unchanged and could be raised to up to 64.9 percent starting from January 2014 if the deal wins antitrust approval in key markets such as Brazil and Argentina.
The deal also gives parties in Telco nine more months to unwind their shareholder pact.
The mechanics of the deal buy Telecom Italia more time to study a possible sale of its treasured TIM Participacoes unit in Brazil and press ahead with its planned separation of its fixed-line network, an asset seen as strategic by Italian politicians.
($1 = 0.7412 euros)
Additional reporting by Stephen Jewkes; Editing by Lisa Jucca and Mark Potter