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Telecom convert savings shares: an obstacle on the road of French Investors
Surprisingly, the board of directors met for the quarterly put to the vote the conversion project. To shareholders without voting rights is offered with one ordinary share swap, adding almost 10 cents and waiving privilege on the coupon in order to vote. Conversion may hinder the climb of the French group TLC. Pending Actions nell'afterhours
MILAN - The board of Telecom Italy met to approve the accounts of the third quarter, surprisingly put to the vote the draft conversion of savings shares into ordinary fee. The transaction, which had already been investigated several times during the management of Franco Bernabe, expected to be offered to members without voting rights of concambiare their title with one ordinary adding just under 10 euro cents and thus giving up the privilege dividend. The Stock Exchange has suspended from trading securities evening.
Telecom Italy for the operation creates value in so many ways. First, the company will collect about 600 million euro from the market; second - eliminating 166 million extra coupons related to savings shares and discounting this value to the weighted average cost of capital - the group that is to save around 2.3 billion. And so, between collection and lower costs, Telecom creates about 2.9 billion greater value of 19 billion shares (assuming full conversion of rnc in ordinary) translates to about 15 cents more per share. The transaction must be approved by the shareholders ordinary Telecom, with a two-thirds majority.
But Telecom will not only be richer, will be even bigger and with much floating, a key requirement to fit into European indices of capitalization and liquidity, hence the Italian group had been excluded when coinciding with the peak of the crisis had slipped to a market value of ordinary shares and savings of only 13 billion euro
Currently the share capital of the group consists of 13.5 billion ordinary shares and 6 billion non-convertible savings shares, thus a full conversion would have the effect to be a part of creating about 15 cents of value but on the other to dilute 31 % voting rights of existing shareholders. It is not a minor detail in a time when the company is the subject of interest of several foreign groups including the media giant Vivendi (a former partner at 20.5% of the capital) and the French entrepreneur Xavier Niel (which purchased options on 15.2% of the capital). So if the operation conversion was successful, the participation of Vivendi would drop to about 14% of the ordinary share capital of the new Telecom while for Niel you should check if this extraordinary event could trigger the clauses of early conversion options.