Olivetti Confirms Dumping Deutsche Telekom at Altar
Olivetti, one day after acquiring a majority stake in Telecom Italia, on Sunday confirmed it had ditched plans for a merger with Deutsche Telekom that would have been the biggest in history.
But a source close to Olivetti said that Olivetti Chief Executive Roberto Colaninno “has said he is open to discussing international alliances, especially in Europe, and has never ruled out talking to Deutsche Telekom sometime in the future.”
Analysts said Telecom Italia shares could gain on relief that Olivetti has won a larger-than-expected stake--appearing to avoid a legal battle threatened by Telecom Italia if Olivetti ended up with an interest below 50%.
Olivetti’s takeover has not come cheap--it will pay about $64 billion to take 51% and control of Telecom Italia--and its high debts may condition strategic choices.
It will also show its gratitude to the banks and advisors who masterminded the coup, led by Italy’s Mediobanca, with hundreds of millions of dollars in success-related fees.
Three U.S. banks and financial services firms--Chase Manhattan Corp., Lehman Bros. Holdings Inc. and Donaldson, Lufkin & Jenrette--helped Olivetti put together the bid using 1980s-style leverage on a scale never seen before in Europe. And dozens of others will exact a hefty price for arranging loans and the world’s largest corporate bond issue.
But analysts say Deutsche Telekom looks like the biggest loser in the battle for Europe’s fourth-largest telecom group.
DT faces a major headache about what to do next after poisoning relations with its erstwhile partner France Telecom to pursue a link-up with Telecom Italia.
Deutsche Telekom said Saturday that it had no plans to sell its 2.0% stake in France Telecom. But it said it remained convinced of the “industrial logic” of the merger plan and would continue pursuing its international strategy.
Olivetti says it will lay off about 13,000 workers at Telecom Italia’s core fixed-line telephone operations and carry out 6,500 further job cuts.
