Pirelli, Benetton Family to Buy 23% Stake in Olivetti
Pirelli and the Benetton family agreed to buy 23% of Olivetti for $6 billion to become the main investors in the company that runs Telecom Italia, Italy’s dominant phone company.
The stake is being sold by a holding company owned by Telecom Italia Chief Executive Roberto Colaninno and his partners. Olivetti said Colaninno quit as chief executive of Olivetti and Telecom Italia.
Olivetti’s share price has dropped almost 30% since Colaninno orchestrated the May 1999 purchase of a controlling stake in Telecom Italia for $30 billion, Italy’s biggest hostile takeover. Pirelli and the Benettons are taking over Colaninno’s stake in the company that controls about 90% of Italy’s traditional phone market.
Telecom Italia also owns the country’s largest mobile phone business, Italy’s No. 1 Internet company and two television channels.
Olivetti said Colaninno will be replaced by Enrico Bondi, the chief executive of Montedison, the holding company that owns Italy’s second-largest power company.
Pirelli, Europe’s biggest cable maker, and Edizione Holding, an investment company controlled by the family behind the Benetton Group clothing chain, will jointly control 27% of Olivetti after the purchase.
They are investing in a company with $34.5 billion in debt, of which $19 billion is held by Telecom Italia. European rival Deutsche Telekom has about $60.3 billion in debt, and British Telecommunications owes about $39 billion.
“Telecom Italia has a strong market position and we wanted to invest in telecoms, so the fit made sense,” said Pirelli CEO Marco Tronchetti Provera, whose company makes fiber optic cables and tires.
Bell, a holding company controlled by Colaninno and his partners, accepted the offer for its Olivetti shares over the weekend. After the purchase, Pirelli will own 60% of a company set up to buy the shares, while the rest will be owned by Edizione.
Pirelli and Edizione each already owned 1.8% of Olivetti and together will own 27% of the company’s shares once the acquisition of Bell’s stake is concluded.
Pirelli will cover its part of the purchase with the proceeds from last year’s sale of an optical systems business to Cisco Systems Inc. and the sale of an optical components unit to Corning Inc. Those asset sales raised almost $6 billion.
Since Colaninno bought control of Telecom Italia, the market value of Olivetti has dropped to about half the value of the company’s 55% stake in Telecom Italia’s common shares. Olivetti is worth about $14.6 billion, and Telecom Italia has a market value of about $59.5 billion.
