The proposed share buyback for a portion of the Telecom Italia Media shares described herein is not being made and will not be made, directly or indirectly, in or into the United States, Canada, Japan, Australia, or any other jurisdiction in which any such share buyback would require the authorization of the relevant regulatory authorities or would violate applicable laws or regulations. Telecom Italia Media will not be permitted to accept any tenders made from any of the foregoing jurisdictions.
Except as provided below, any offer to buy securities described herein is not being made, directly or indirectly, in or into, or by the use of the mails of, or by any means or instrumentality (including, without limitation by mail, telephonically or electronically by way of internet or otherwise) of interstate or foreign commerce, or any facility of any securities exchange, of the United States of America and any such offer will not be capable of acceptance by any such use, means, instrumentality or facility.
The information contained herein does not constitute an offer in the United States or an offer to acquire securities in the United States.
Virgilio and Tin.it acquired
for a total of euro 950 million cash
TI Media to focus on television activities
Merger by incorporation of LA 7 into TI Media
New resources for TI Media:
- Approximately euro 250 million invested in media
- Buyback for up to euro 148 million with a premium of approximately 20% on the average share price over the last six months
- Extraordinary dividend payout in 2006 now estimated at euro 550 million
The Boards of Directors of Telecom Italia and Telecom Italia Media (TI Media), met today and approved the restructuring of the Group’s Internet business whereby Telecom Italia will absorb all Group internet activities, giving Telecom Italia Media the financial resources to expand its business.
More specifically, the transaction entails:
- the acquisition by Telecom Italia of all Virgilio and Tin.it assets for a total of Euro 950 million in cash;
- the use of revenues from the sale by TI media to
- make new investments in the media sector, for an estimated amount of approximately Euro 250 million in the three-year period 2005-2007;
- purchase its own shares, up to the maximum permitted by law, amounting to approximately Euro 148 million;
- payout extraordinary dividends in 2006 currently estimated at approximately Euro 550 million;
- the merger by incorporation of La7 Televisioni into TI Media.
Industrial and strategic reasons for the transaction
As with the merger of TIM by incorporation into Telecom Italia (which the Shareholders' Meetings of the two companies will be examining in the coming days), this transaction is also aimed at satisfying the need to streamline the Groups’ activities, taking the following into consideration:
- with the development of the broadband market and premium content, the Internet business is becoming increasingly capital intensive, requiring integrated management models in the combined offer of telecommunications and Internet. This is confirmed by the fact that all the main European telecommunications operators have seen the integration of their internet and fixed line activities as necessary;
- the presence in the Internet sector of two companies belonging to the same Group creates overlapping and does not allow for the optimal use of resources allocated to investment in an increasingly dynamic market;
- it is in Telecom Italia’s interest to make use of Tin.it and Virgilio’s assets in order to pursue an effective strategy for increasing the value of growing band availability and premium content;
- backed by La7 and MTV, TI Media enjoys a recognized position in the television market, with attractive growth prospects in digital terrestrial television (where it is one of the top players), a sector however, which still requires major investment in infrastructure and content;
- with adequate financial resources and its focus on the media business, TI Media can develop content, expand its coverage of analogue channels and increase the number of frequencies and content/channels in digital terrestrial television.
The acquisition of Virgilio and Tin.it
The details of the transaction, worth a total of Euro 950 million, are as follows:
- the purchase of Virgilio by Telecom Italia which will acquire 60% of Webfin (which currently holds 66% of Matrix) and 0.7% of Matrix, currently held by TI Media, for a total amount of Euro 70 million. Upon conclusion of the transaction, Telecom Italia, which already holds a 40% stake in Webfin and a 33.3% stake in Matrix, will have full ownership of Webfin and Matrix, and therefore full control over Virgilio’s operations;
- Telecom Italia will acquire 100% of the share capital in a newly formed company to which TI Media will transfer the Tin.it business unit. The sale price will be Euro 880 million.
The transaction, neutral from a tax point of view, will generate approximately Euro 850 million capital gain for TI Media at parent level and about Euro 900 million at a consolidated level.
The investment banks JP Morgan and Lazard and Professors Mauro Bini and Maurizio Dallocchio assisted the Telecom Italia Board of Directors in determining the transfer price for Tin.it and Virgilio. The TI Media Board of Directors was assisted by Morgan Stanley, and investment bank Merrill Lynch upon the autonomous and exclusive designation of the independent Directors.
In addition, Prof. Angelo Provasoli, mandated by Telecom Italia, audited the accuracy and fairness of the criteria used by all the consultants nominated by both Telecom Italia and TI Media.
The use of revenues from the Internet Asset Sale
Telecom Italia Media plans to invest to consolidate its presence in the television business. This business offers attractive growth opportunities in digital terrestrial television as a new market in constant expansion offering value-added products (such as pay-per-view and interactive TV) that will contribute to increasing the company’s profitability.
Buyback of Own Shares
The TI Media Board of Directors has given mandate to the Chairman to call a Shareholders' Meeting to resolve upon:
- authorization to buy back up to 10% of the company's ordinary and savings shares at a price per share of Euro 0.40 and Euro 0.33 respectively, corresponding to a maximum total of approximately Euro 148 million;
- a reduction in share capital through the cancellation of own shares bought back.
The Shareholders’ Meeting has been scheduled for May and the buyback, through public tender offer, following authorization by the Consob.
The transaction offers an opportunity for those TI Media shareholders to liquidate part of their investment at a price which is coherent with the valuation determined for the sale of the Internet assets; the proposed price represents a premium of approximately 20% over the average share price for the ordinary and savings shares over the past six months.
Telecom Italia will not participate in the buyback, leaving the entire amount for the transaction to the market. If the public tender offer is fully subscribed and the shares thus bought back are cancelled, Telecom Italia will increase its direct controlling stake (60.4%) and indirect stake (2.1% through Telecom Italia Finance) from the current 62.5% to 69.4% of the ordinary capital..
Financial resources in access of the user, may allow for a total dividend payout currently estimated at approximately Euro 550 million in 2006, in accordance with TI Media’s financial and operating requirements.
The Merger by Incorporation of La7 Televisioni into TI Media.
Once it exits the Internet business, TI Media will streamline its operating and corporate structure through the merger by incorporation of La 7 Televisioni (currently wholly-held by HMC S.p.A., a wholly-owned subsidiary of TI Media).
This transaction, which will not entail a capital increase by the acquiring company, does not require a Shareholders' Meeting resolution. The integration process is expected to be complete by the end of the year.
- finalization of the contractual agreement between TI Media and Telecom Italia
- transfer of Tin.it to a newly formed company wholly owned by TI Media
- sale of the equity investments in Webfin, Matrix, and the "new” Tin.it by TI Media to Telecom Italia
- TI Media General Shareholders’ Meeting for the approval of the public tender offer for the buyback of own shares
- TI Media public tender offer for the buyback of its own shares, following CONSOB approval
- finalization of the TI Media-La7 Televisioni merger process
Milan, April 4, 2005