Hutchison unit targets control of Telecom Italia
Any transaction was likely to be held "via contribution in kind or merger", subject to Hutchison acquiring a stake in Telecom Italia to "become the leading shareholder of the company", Milan-based Telecom Italia said in a statement after a board meeting yesterday.
Telecom Italia, which has received approval from its board to pursue a possible merger with Hutchison Whampoa's Italian business, said billionaire Li Ka-shing's company would want control of any combined entity.
A deal would combine Italy's biggest wireless carrier with the No4, Hutchison's 3 Italia, which is valued at about €1.5 billion (HK$15.2 billion) based on its reported earnings and multiples of publicly traded European carriers.
An entry by Hutchison as shareholder could unravel a six-year pact at Telco, whose investors Telefonica, Intesa Sanpaolo, Assicurazioni Generali and Mediobanca together hold 22.4 per cent of Italy's former phone monopoly.
"If Hutchison takes control, investors such as Telefonica will probably have to sell their stake or at least reconsider their position," said Francisco Salvador, a strategist at FGA/MG Valores. "The entrance of a powerful investor such as Hutchison Whampoa through a potential merger would help Telecom Italia solve part of the problems."
Representatives of Telefonica, Mediobanca, Generali and Intesa Sanpaolo declined to comment.
"Contacts between Telecom Italia and 3 Italia on possible business combinations are still preliminary and exploratory," Hutchison said in a statement.