Italian job

16 March 2007 By Mike Verdin

IntesaSanpoalo is rallying Italian banks to buy the stake at a premium. That not only helps Tronchetti but solves a problem for the state. They may think its worth buying the shares to curry political favour at a time of consolidation. But it looks like a poor use of capital.

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IntesaSanPaolo is, according to Italian newspaper reports, forming a consortium of Italian financial institutions to try to buy Pirelli out of Olimpia, the shell company through which it exercises quasi control of Telecom Italia.

Pirelli owns 80% of Olimpia, which owns 18% of TI's voting shares.

The consortium would seek to buy out Pirelli at a TI share price of E2.70, according to a person familiar with the situation. A mechanism allowing Pirelli to share in any future rise in TI shares may also be included in the deal, the person added.

Pirelli on March 12 said it had mandated its chairman, Marco Tronchetti Provera, to ``explore all the possible options'' on its Olimpia stake.

Pierluigi Bersani, Italy's Industry Minister, on March 13 urged Italy's banks give "strategic stability" to the country's telecoms sector. "We need to find a way so that our industrial projects have strategic stability points through banks, insurance firms and pension funds," he said.

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