Bonds Syndicated loans Equity US deals of the year
MERGERS & ACQUISITIONS
Colaninno's Houdini act
Acquirer: Olivetti
Type of deal: takeover of Telecom Italia
Amount: e60 billion
Launched: February 20 1999
Advisers: Chase Manhattan, DLJ, Lehman Brothers, Mediobanca
Audacious deal, shame about the aftermath: that at least is the prevalent opinion on Olivetti's conquest of Telecom Italia, one year after the Piedmontese company launched its hostile, reverse, leveraged takeover. The consequence of Olivetti's use of a shell company, Tecnost, to perform an LBO on one of Europe's major telecoms players is a brittle shareholding structure with the debt at one end of the group and the profits at the other.
At the time of writing, Olivetti holds 72.9% of Tecnost, which owns 55% of Telecom Italia's voting shares. Telecom Italia owns 60.2% of its mobile telephony subsidiary Tim, which is the real star of the group. Tecnost relies heavily on the dividends from Tim in managing approximately e16 billion ($16 billion) of debt, but extracting the earnings involves heavy leakage of money to minority shareholders. Because of this structure, Telecom Italia would find it hard to use either new stock or cash for further M&A deals of any size. Thus the group has largely been left out of the frenzy of deals in the rapidly integrating European telecoms industry.