Mediobanca and Generali, two of the most powerful financial groups in Italy, on Wednesday agreed to join an expanded controlling group of shareholders in Telecom Italia in a crucial step aimed at stabilising the telecoms group.
Mediobanca, the investment bank, and insurer Generali will be adding shares they already own in TI to those held by Olimpia, a holding company controlled by Pirelli, the tyre company, and the Benetton family. Together the group will own just over 23 per cent, up from the 18 per cent owned already by Olimpia.
Telecom Italia has been in turmoil since it announced a change of strategy in September that could see it split into three and with the possible later sale of large assets. Marco Tronchetti Provera, the company’s chairman, resigned soon afterwards amid union unrest and a deep dispute with the government of Romano Prodi.
Meanwhile Guido Rossi, the company’s new chairman, has been struggling to restore stability amid a probe by financial regulators into the company’s disclosures and a separate criminal investigation into wiretapping that involves some present and former employees of TI and Pirelli.
Mr Tronchetti is still the dominant TI shareholder as he is also the chairman of Olimpia and Pirelli. Olimpia owns 18 per cent of TI shares and has been the vehicle through which Mr Tronchetti has controlled the company.
Pirelli announced the move by Mediobanca and Generali on Wednesday night. “The adherents to the [new] pact intend to assure continuity and stability in the shareholding and governance of the Telecom Italia group,” it said.
The presence of two large and influential shareholders in the controlling group of TI is likely to be seen as a help to Mr Rossi as it puts more distance between the company’s management and Mr Tronchetti. Mediobanca and Generali will have to be consulted by other pact members ahead of certain economic decisions and all the pact members will meet before TI shareholder meetings.
Mr Tronchetti could also benefit from the move as it bolsters his assertion that Pirelli and Olimpia’s economic interest in TI commands a “control premium”. Mr Tronchetti paid almost double the current price of TI shares when he took control in 2001 and has resisted writing down substantially the value of the holding.
A steep write-down would complicate the tangled web of finances and cross-shareholdings, but a governance pact in TI of almost a quarter of the shares might be argued to be less vulnerable to a takeover than one with only 18 per cent.
Pirelli said Mediobanca and Generali also had the right under the pact to purchase a small number of extra shares and the new pact was also open to other shareholders holding up to 0.5 per cent of TI shares.