Conversion project and buy back approved

05/03/2001 - 00:00 PM

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Under the chairmanship of Roberto Colaninno, the Telecom Italia ordinary shareholders met today in extraordinary session, which also served as a Special Shareholders´ Meeting, and in ordinary session.

Thus constituted, the Meeting approved the plan for voluntary conversion of savings shares into ordinary shares and the subsequent buy back of ordinary shares as presented by the company Board of Directors on 31 March.

The plan approved today by the Shareholders´ Meeting will enable Telecom Italia to:

- optimise and simplify its capital structure;
- augment considerably its financial flexibility;
- improve its per share financial indicators.
The Extraordinary Shareholders´ Meeting also approved the conversion of share capital into euros through the redenomination of the par value of ordinary and saving shares and the rounding up of these shares from 1000 lire (corresponding to 0.5165 euro) to 0.55 euro. This is to be undertaken partially through the annulment of treasury stock currently held, and for the remaining part through a partial transfer to capital of reserves.

Modification of the power of attorney granted to the Board of Directors, resulting in modification of article 6 of the company Articles of Association, was also approved to increase share capital up to a maximum of 73,000,000 ordinary shares, to service the stock option plan for Group executives.

The conversion of saving shares
Following the mandate granted today by the Shareholders´ Meeting, the Board of Directors will be able to launch an offer for conversion of savings shares the moment in which it discerns that conditions are opportune and will permit the operation to be successful on the Italian and international financial markets, setting the time period, conditions and terms of execution within the limits established by the Shareholders´ Meeting, notwithstanding that the Offer may not be undertaken after 31 December 2001.

The conversion offer will be undertaken on the basis of the following conditions:

- the conversion ratio will be 1 to 1;
- the cash premium to be paid to convert one savings share into an ordinary share will be set as a percentage of between 38% and 42% of the average of the Official Price of the ordinary share of Telecom Italia, calculated in a time period in line with standard procedures immediately preceding the date on which the Board of Directors approves the start of the operation;
- such premium, determined in the above manner, cannot, however, be less than 5.25 euros per share;
- the conversion of the savings shares will be carried out in a manner that will permit those participating in the conversion to also clip the next dividend and will be subordinate to the attainment of a minimum level of participation equal to 60% of the savings shares in circulation; the Board will, further, have the faculty to renounce this minimum threshold at the conclusion of the offer.

In the event 100% participation is reached and with a premium equal to a minimum 5.25 euros per share, the total proceeds deriving from the conversion will be equal to approximately 10.8 billion euros (approximately 21,000 billion lire).

Ordinary share buy back
The Shareholders´ Meeting authorised the creation of a new company (Newco) owned entirely by Telecom Italia which will undertake the buy back of Telecom Italia ordinary shares for an amount equal to the proceeds from the conversion but in any event not exceeding 10% of total share capital.

Following the conclusion of the buy back the Newco will be merged by incorporation into Telecom Italia S.p.A., that will therefore become owner of the ordinary shares tendered in the public tender offer.

The buy back operation, to be conducted through a Newco, is aimed at reducing to a minimum the time period between the payment of the conversion premium and the payment by Telecom Italia to ordinary shareholders for repurchasing its ordinary shares. In this manner it will not be necessary to await approval of an "extraordinary" balance sheet of Telecom Italia showing the increase in reserves available as a result of payment of the conversion premium.

The buy back operation, which will be undertaken through a public tender offer, will begin as soon as the offer for conversion of saving shares to ordinary shares has concluded, and only if this conversion is successfully concluded.

The price per share for the tender offer will be equal to the average of the Official Prices for Telecom Italia ordinary shares (calculated in a time period in line with standard procedures immediately preceding the date of the Board of Directors meeting that will move to undertake the buy back), increased by a sufficient premium to ensure the success of the operation, but not greater than 25%.

Should, subsequent to the buy back of ordinary shares, excess reserves remain from the payment of the conversion premium, a Meeting of the Ordinary Shareholders of Telecom Italia will be called to approve their distribution. From a financial point of view, therefore, the operation will be neutral for Telecom Italia.

The Shareholders´ Meeting granted a mandate to the Board of Directors -- and on its behalf to its Chairman -- to undertake all actions, enter into all contracts and fulfil all formalities necessary to put into effect the resolution made today.

Telecom Italia was advised in this operation by Lehman Brothers International and JP Morgan.