Olivetti's $58 billion (€52.76 billion) bid for Telecom Italia has hit a major obstacle, with Italy's bourse regulator Consob last night saying the offer lacked important information and was therefore inadmissible.
Consob said the offer was inadmissible because it hinged on "the positive resolution of certain regulatory aspects currently being examined by the authorities" as well as the sale of Olivetti's stake in telecom units Infostrada and Omnitel to Germany's Mannnesman.
Consob's dramatic decision, following a legal challenge from Europe's fourth largest telecoms group Telecom Italia, throws a spanner into what had been shaping up as one of Europe's largest takeover battles. However it does not appear to rule out a revised offer from Olivetti, Italy's second telecoms group.
Consob said in a statement that Italy's financial regulations governing company takeovers contained a clause that stipulated bidders must "communicate all essential terms, aims and consultants involved in the offer without delay".
The bourse regulator found fault with Olivetti's offer since it was dependent on the successful outcome of the regulatory hurdles and Mannesman sale, and therefore lacked "essential terms" required by law including a time frame for the bid.
Since the offer is inadmissible, there can be no counter-offer either, Consob said, apparently referring to speculation that Telecom might try to swallow Olivetti instead. An Olivetti spokesman said the firm had no immediate reaction.
Earlier, Telecom Italia shares raced higher as Europe's fourth-biggest telecoms group sharpened its claws to fend off the planned €10 per share bid, bringing in bankers to plan its defence and calling a board meeting for Thursday. Following the Consob ruling, the next move is now not clear.
As rumours spread that a counter-bid or supportive alliance might come from abroad, the Prime Minister, Mr Massimo D'Alema, vowed to keep the former state monopoly in Italian hands. Analysts said that they felt the bid undervalued the Telecom group and would need to be raised to have any chance of success.
The Milan bourse gave the planned cash, bond and share bid a lukewarm reception as investors doubted it would be the last word and took fright at the towering debt pile Olivetti would have to amass to capture its five-times larger competitor.
Olivetti shares - the most heavily traded on the bourse - fell over 7 per cent after the group said it would hold a board meeting tomorrow to seek a capital increase to help finance the deal. The shares later steadied 6.07 per cent down at €3.02. Shares in Telecom Italia surged past €10 per share, triggering a Europe-wide telecoms stock rally and pushing to a new high of €10.08 after being suspended at the 10 per cent limit up.
The shares later eased back to trade 6.95 per cent up while its unit, Telecom Italia Mobile, was 3.95 per cent up.
