Olivetti Move Clears the Way for Takeover of Telecom Italia

LONDON —  Italy’s Olivetti clinched a majority stake in Telecom Italia on Friday, clearing the way for completion of the hostile $64-billion takeover of Italy’s No. 1 phone company.

By garnering 51% of Telecom’s shares, Olivetti avoids having to battle Telecom’s current management for control--a contentious outcome that industry analyst Dwayne Taylor of Robert Fleming Securities described as a “lawyers’ dream.”

Italian stock market officials said late Friday in Milan that Olivetti had secured an unspecified majority stake in Telecom. The announcement came after officials toted up the results from the last day of the offer by Olivetti, a diversified communications and office products business.

On Thursday, Olivetti had less than 20% of Telecom’s shares. But on the final day for securing shareholder backing for its upstart effort, most of Telecom Italia’s strongest supporters jumped ship.

It was a dramatic climax to the largest unfriendly corporate takeover ever launched in Europe, in which Olivetti took aim at a target five times its size.

The result surpassed the 35% threshold Olivetti said it needed to press ahead with its plan to acquire Italy’s former government-run telephone monopoly for 11.5 euros per share, or $12.15 at current exchange rates.

Olivetti Chief Executive Roberto Colaninno had said he might call off the bid if his company failed to gain between 35% and 67% of Telecom’s shares. Now, with a majority stake in Telecom, he is almost certain to push ahead.

“Colaninno has put a lot into this, and he’s not going to back out,” said Taylor of the London-based brokerage.

Olivetti will hold a board meeting today to assess the outcome of the takeover bid.

Telecom Italia spokesman Alberto Brunelli declined to comment Friday night.

But another Telecom Italia official held out the possibility that Franco Bernabe, Telecom’s chief executive, might be willing to negotiate a power-sharing arrangement with Colaninno.

Among the day’s biggest disappointments for Telecom were the defections of almost all of its core shareholders, an investor group organized when Telecom was privatized in 1997.

Only one core shareholder, Credit Suisse Group, said it would stick with Telecom’s current management.

In another blow to Telecom, Olivetti said Friday that the European Union Commission had approved the sale of its stake in Italian mobile phone operator Omnitel. Olivetti is counting on the sale to Germany’s Mannesmann to generate much of the cash it needs to finance its takeover of Telecom.

Friday’s result also appears to doom Telecom Italia’s proposed defensive merger with its German counterpart, Deutsche Telekom.

The two companies announced plans for a friendly merger in April, but since then the deal has met with resistance from Italian leaders, who fear that the German government might try to influence the merged companies through its majority ownership of Deutsche Telekom.