Billionaire Sawiris Makes Offer for Telecom Italia Stake

Egyptian Billionaire Naguib Sawiris
Egyptian billionaire Naguib Sawiris last year merged Italy’s Wind with VimpelCom Ltd. Photographer: Simon Dawson/Bloomberg

Egyptian billionaire Naguib Sawiris, founder of Orascom Telecom Holding SAE, offered to acquire shares in Telecom Italia SpA, sending the former Italian phone monopoly’s stock to its biggest increase in five months.

Telecom Italia received interest from Sawiris about an investment “through underwriting of new stock,” the Milan-based carrier said in a statement today. The offer is valued at more than 2 billion euros ($2.5 billion), said a person familiar with the matter, asking not to be identified because the discussions are confidential.

Buying a stake in Italy’s biggest phone company would mark Sawiris’s return into a market that has attracted investors such as Hong Kong billionaire Li Ka-shing a year after the Egyptian businessman sold mobile operator Wind Telecom SpA. In a telephone interview today, the 58-year-old said his offer is valid until the end of this year.

“I want to participate in a capital increase,” Sawiris said. “Management said they want to study the proposal and will revert back to me.”

Telecom Italia rose as much as 7.8 percent to 75 cents, the steepest intraday increase since June 19. The shares traded up 4.6 percent at 72 cents as of 2:18 p.m. in Milan, giving the company a market value of 13.5 billion euros. They reached a 15-year low of 61 cents on July 24.

‘New Resources’

Lazard Ltd. is advising Sawiris on Telecom Italia, according to his spokeswoman Manal Abdel Hamid.

Calling Sawiris’s interest an initiative “described as being aimed at bringing new resources to the company to be dedicated to growth projects,” Telecom Italia said its board of directors discussed the billionaire’s intention at a Nov. 8 meeting, and will evaluate after “necessary verification.”

“Telecom Italia is so distressed something has to happen,” said Robin Bienenstock, an analyst at Sanford C. Bernstein In London. “M&A will drive the share price up and if there is resistance to Sawiris, Telecom Italia may have no choice but to do a deal with Cassa Depositi.”

Telecom Italia is considering a plan to spin off its fixed-line network, and Chief Executive Officer Franco Bernabe has said there is an “open dialogue” with state lender Cassa Depositi e Prestiti SpA about a possible investment in the network.

Telco Owners

A sale of new shares will dilute the stakes held by Telefonica SA, Assicurazioni Generali SpA, Mediobanca SpA and Intesa Sanpaolo SpA, which together own about 22 percent of Telecom Italia through holding company Telco SpA.

Earlier this year, the owners renewed a shareholder agreement until the end of February 2015, with a window to request early withdrawal in September 2013. Telco lowered the book value of its Telecom Italia holding to 1.50 euros per share in May, still more than twice the current share price.

Telecom Italia on Nov. 9 reported a 13 percent decline in net income to 681 million euros from a year earlier. The company is suffering as competition and the region’s sovereign debt crisis crimp sales and profit margins.

Sawiris last year merged Italy’s Wind with VimpelCom Ltd. This year, he added gold to his investments after agreeing to buy Canada’s La Mancha Resources Inc. The Sawiris family also has interests in construction, cement, real estate and hotel development.

Falling valuation of European telecommunications companies has attracted other billionaire investors. Carlos Slim, the world’s richest man, this year acquired minority stakes in Royal KPN NV and Telekom Austria AG, the biggest carriers in the Netherlands and Austria.

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