Telecom Italia Spa that attained an endorsement from its board for pursuing a possible union with the Hutchison Whampoa Ltd said thatTelecoma Italia, based in Milan said that any type of exchange will probably be held through the merger or a contribution in kind, subjected to Hutchinson attaining a stake in the TelecomaItalia for becoming the popular shareholderof the firm.
A deal would join the largest wireless carrier of Italy with 3 Italia of Hutchinson, valued nearly 1.5 billion euro depending on the reported earnings as well as multiples of publicly operated European transporters. An admissionby Hutchinson based in Hong Kong in the form of shareholder could undo a pact of six year at the Telco Spawhose depositors IntesaSanpaolo Spa, Telefonica SA, Mediobanca Spa and AssicurazioniGenerali Spa hold nearly 22.4 percent of the earlier phone monopoly of Italy.
A strategist at the FGA or MG Valoresbased in Madrid said that if Hutchinson takes the control, the investors like Telefonica will possible have to sell the stake or reconsider their respective position. He added that the entry of a strong investor like Hutchison Whampoa through potential merger will definitely assistTelecomaItalia solve several problems.
The representatives at Mediobanca, Telefonica, IntesaSanpaolo and Generali were not available for comment.
Hutchison told in a statement that the contacts between TelecomaItalia Spa and 3 Italia Spa on business groupings are exploratory and preliminary.
An individual who is familiar with this matter said that for Hutchison, the largest investor in the wireless network of Europe, TelecomaItalia’s high debt which reached nearly 28.3 billion euro in 2012 adjusted for certain products is a major concern.
The carrier’s groupdesignated CEO, Franco Bernabe to lead the panel for exploring the possibility of a trade merger with the Hutchison. Some of the otherimportant members include Julio Linares of Telefonica, IntesaSanpaolo’sElioCosimo Catania, Luigi Zingales and Generali’sGabriele Galateri.
Telecoma Italia told in a statement that they will check within a short period of time the interest of the company in carrying such transactions.
Two individuals who are familiar with the discussion said that the point that Bernabewould not lead the discussions himself and at the same point of time will also be linedby directors is an indication that some investors are not at all satisfied with performance. At the same point of time, some investors of Telco are also skeptical regarding the merger as no trade plan has been offered. The shares of Telecom Italia increased by 4.5 percent and reached nearly 64 percent.