Reinforcing Tronchetti's cascade

18 July 2003 By Hugo Dixon Follow @hugodixon

Meanwhile, Mediobanca, a key ally, is buying more shares. Add in other Tronchetti friends and his position seems secure. A buyback of TI shares wasn t fully taken up. But E5.2bn have still been cancelled. That limits Tronchetti s dilution.

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Mediobanca is in the process of acquiring more shares in Telecom Italia, according to a person familiar with the situation. The Milanese investment bank, a key ally of Marco Tronchetti Provera, TI's chairman, aims to end up with a stake of about 2.2%. The bank has been active in the derivatives market as a way of assembling this stake, the person said.

Mediobanca's share purchase is being undertaken at a time when Telecom Italia is in the final stages of an extremely complex merger with Olivetti, its controlling shareholder. Olivetti is controlled by a cascade of other companies, all controlled by Tronchetti.

TI is unaware of Mediobanca's move, according to an advisor. It believes the bank's stake in the new TI would simply be the reflection of its preexisting stakes in Olivetti and TI. Mediobanca owns just over 2% of Olivetti.

Meanwhile, Olivetti announced that it had spent E5.2bn on buying back TI shares. E4bn has been spent on buying back ordinary shares – 9.5% of the class. A further E1.2bn has been spent on buying back nonvoting savings shares – 12% of the class. Olivetti had originally earmarked E9bn for the operation, but only E5.2bn was tendered.

Olimpia, the vehicle through which Tronchetti controls Olivetti, will see its stake in the new TI fall to 12% following the buyback and the merger. Olimpia previously held 29% of Olivetti which, in turn, held 54% of TI.

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