Milan-based Olimpia plans to raise 2 billion euros ($2.6 billion) in new cash from shareholders by February 2 to buy Telecom Italia stock, it said in a statement e-mailed yesterday. That will help Olimpia raise its stake to 19% from the 17% it now holds, according to Bloomberg calculations.
The purchases could help push Telecom Italia shares higher, said Alessandro Avanzi, who helps manage about $330 million in assets including Telecom Italia shares at Banca Valsabbina in Brescia, Italy. It may be a sign the companys going to raise dividends to get liquidity to Olimpia.
Telecom Italia chairman Marco Tronchetti Provera and partners including the Benetton family and Italys two largest banks effectively control the phone company through Olimpia. They are seeking to pay off 3.2 billion euros in borrowings linked to Olimpias takeover of Telecom Italia in 2001 through dividends from the phone company. They need to buy more stock to maintain their holding in Telecom Italia as it combines with wireless unit Telecom Italia Mobile SpA in a 21 billion-euro cash and share transaction set to close by the end of June.
Telecom Italia, which on Friday completed the cash portion of its offer for Telecom Italia Mobile stock, will create 2.29 billion new shares as part of the merger plan to swap with holders of Telecom Italia Mobile stock. Telecom Italia shares have gained about 26% in the last six months as investors bought the stock ahead of the wireless merger. The shares fell 7 cents, or 2.25%, to 3.08 euros in Milan today after the end of the cash offer for Telecom Italia Mobile shares. Telecom Italia has a market value of 46 billion euros.
Olimpia signed two contracts with primary financial institutions, asking the banks to buy stock and bonds convertible into Telecom Italia shares, it said in the statement.
The investment banks, which Olimpia did not name, already have about 958 million euros in securities available for the holding company to purchase, according to the statement. JP Morgan Chase & Co and Mediobanca SpA were hired to buy the securities on Olimpias behalf, Italian daily Corriere della Sera reported today without saying where it got the information.
Olimpias banks have accumulated securities worth about 310 million Telecom Italia shares priced at about 3.09 euros for each stock under the contracts announced yesterday, Olimpia said. Thats equal to about 3% of Telecom Italias common stock at a price about 2% less than Fridays close, according to Bloomberg calculations.
Olimpia can buy about 650 million shares in total at that price as part of its plan to spend about 2 billion euros on Telecom Italia stock. Added to the 1.75 billion shares Olimpia already has, the holding company will own about 19% of the phone companys total outstanding regular shares.