Proposed changes to Italy’s takeover laws, which could force Telefonica to make a full takeover bid for Telecom Italia (TI), have been met with mixed reactions from corporate lawyers.
The new measure proposed by senator Massimo Mucchetti would…
Proposed changes to Italy’s takeover laws, which could force Telefonica to make a full takeover bid for Telecom Italia (TI), have been met with mixed reactions from corporate lawyers.
The new measure proposed by senator Massimo Mucchetti would require a company that obtains effective control of another company to launch a full takeover bid, economics ministry undersecretary Pier Paolo Baretta reportedly told the Italian senate.
Market regulator Consob would have the authority to determine whether a company has a controlling stake.
The current law requires a company to make a full takeover bid only if it secures a stake of more than 30%.
Companies would also be able to introduce their own takeover thresholds, requiring shareholders with ‘de facto’ control to make offers for the remaining shares.
If introduced, the new measure is likely to affect the Italian telecoms incumbent, in which Spain’s Telefonica recently agreed to gradually increase its stake.
Telefonica intends to boost its interest in holding company Telco, which owns 22.4% of TI, from 46% to 100% from next year.
Gian Luca Zampa, a partner in Freshfields’ antitrust, competition and trade practices group, said that while changes to takeover laws have been “heavily debated” for many years, a motion has already been passed requiring parliament to consider the new proposal.
In Zampa’s view, government officials seem to have seized upon the opportunity to influence TI’s ownership and are attempting to rush through changes too rapidly.
“Deputies in parliament want to scare off Telefonica, because that would be the consequence,” he said.
Zampa notes it is likely that Telefonica would not want or be able to take full control of TI, meaning proposed changes could force it to walk away from the investment altogether. He firmly believes that laws governing financial markets need certainty, which the proposed measure seems to lack.
Stefano Macchi di Cellere, an antitrust lawyer with Jones Day, said that while he believes the proposed changes still need “some time” to be properly discussed, it is possible that a bipartisan coalition could garner enough support to introduce them this year.
“Of course, in such an event, it is unquestionable that the new mechanism governing mandatory takeover bids would apply to TI and could force Telefonica to either launch an expensive mandatory offer to gain full control or otherwise reduce its shareholding to a ‘safety’ level below 20%.”
Macchi di Cellere said that while he is critical of the chosen timing to “urgently” amend takeover laws, he believes the new measure could be positive.
“All in all I see the proposal as a welcomed measure which could stir competition in the market in Italy and Europe if the outcome ends the practice of entering new markets by establishing cross-participations rather than launching new ventures, which would have to directly compete with the incumbent.”
Tommaso Salonico, another antitrust partner with Freshfields, said the proposed measure looks like an opportunistic “protectionist strategy” against Telefoncia increasing its stake in TI via Telco.
All the same, in his view, the changes could be positive for TI, one reason being that they will enable minority shareholders to benefit from Telefonica’s estimated valuation of the company. He also thinks “that a better protection of minority shareholders is in general an incentive for new investments in the stock capital of a company and in the end a benefit for the company itself.”
TI acting CEO Marco Patuano is expected to present a business turnaround plan to the board at its 7 November meeting.
