Telecom Italia announces that the board of directors resolved yesterday evening to submit to the shareholders' meeting in mid-December a proposal for the conversion of savings shares into ordinary shares. The move, long awaited by the market, has an anti-takeover function. The operation expects it to come offered to non-voting shareholders to exchange their stock for an ordinary share by adding 9,5 euro cents and thus waiving the dividend privilege.
The operation is optional for now, but it will become mandatory with the end of the offer period at an exchange rate of 0,87 ordinary for each savings share. The company reserves the right to suspend the conversion if the withdrawal will cost more than 100 million of Euro. The meeting to amend Telecom's Articles of Association, necessary to start the transformation, is convened for December 15th. On 17 December it will be the turn of the savings shareholders.
The move, among other consequences, will have the effect of dilute the voting rights of current shareholders by 31%.. In particular, Vivendi's stake will drop from the current 20,03% to 14%. The calculation is more complicated for Xavier Niel (today at 15%): the move by the board could trigger early conversion clauses for the options purchased by the Iliad patron.
In any case, the company will cash in with the transaction approx 600 million euros from the market. Secondly - by eliminating the 166 million extra coupons linked to the savings shares - the de facto group will find itself saving around 2,3 billion. And so, between receipts and lower costs, Telecom creates about 2,9 billion of greater value which out of 19 billion shares (assuming the total conversion of RNC into ordinary shares) translates into about 15 cents more per share.
In detail, the operation involves:
1) OPTIONAL CONVERSION: the attribution to the holders of savings shares of the right to convert the savings shares held into Telecom Italia SpA ordinary shares, on the basis of a conversion ratio equal to 1 ordinary share for each savings share held, with payment of an adjustment 9,5 euro cents for each share;
2) MANDATORY CONVERSION: the mandatory conversion of outstanding savings shares at the end of the period for the exercise of the Optional Conversion into Telecom Italia SpA ordinary shares, based on a conversion ratio of 0,87 ordinary share for each savings share, without payment of any adjustment and without reduction of the share capital.
It is expected that all the conversion operations will take effect before the distribution of the 2015 dividend and this has been taken into account in determining the amount of the adjustment for the optional conversion and the amount of the conversion ratio for the mandatory conversion. Therefore, the savings shares will not benefit for the 2015 financial year from the capital privileges currently envisaged in the Articles of Association.
The proposed terms, defined with the consultancy support of Citi and Equita (also approved by the independent Directors), incorporate a higher implicit premium for those who opt for the Optional Conversion than that envisaged for the Mandatory Conversion as the Company intends to encourage those holders of savings shares who decide to increase their investment in the Company.
There are two objectives: the simplification of the Company's capital structure and the increase of the liquidity and of the free float level of the ordinary shares. As a result of the cash contribution that would be paid by way of adjustment by the holders of savings shares who decide to adhere to the Optional Conversion, a strengthening of the capital structure of the company could also be achieved, and the relative collection will contribute to covering the investment plan innovative solutions, both on the fixed network and on the mobile network, by Telecom Italia.
Savings shareholders who do not contribute to the approval of the mandatory conversion will have the right to withdraw. The liquidation value of the savings shares in relation to which the right of withdrawal should be exercised was set by the Board of Directors at 0,9241 euro per share.
The mandatory conversion is subject to the circumstance that the total liquidation value of the shares for which the right of withdrawal is exercised by the holders of the savings shares does not exceed 100 million euro. If this threshold is exceeded, all the savings shares duly conferred in optional conversion will in any case be considered accepted. Both transactions will be aimed at all holders of savings shares, including shareholders resident in the United States.
The voluntary conversion will be carried out in Italy on the basis of an offer document which must be previously approved by Consob. In the United States, the Company will file a tender offer statement on Schedule TO with the SEC together with the additional documentation required by US law. Eventually, the savings shares will be delisted on the MTA segment of Borsa Italiana.
