EUROPE – Some of Europe’s largest pension funds have backed a call opposing Telecom Italia’s planned merger with Olivetti.

“We hereby wish to reiterate our dissatisfaction with the proposed merger,” consultancy firm Deminor said in an open letter in the Financial Times, “and urge all competent authorities and decision makers to take into account our concerns.”

Europe’s largest pension fund, Stichting Pensioenfonds ABP put its name to the letter – as did the second largest Dutch scheme PGGM. The US’s second largest scheme TIAA-CREF and Netherlands’ Spoorweg Pensioenfonds also put their names to the letter.

Stating the case for minority shareholders, Deminor has issued a letter, as appearing in today’s UK paper, Financial Times, proposing that “Telecom Italia shareholders actively defend their shareholder rights.”

Top asset managers were also signatories to the letter. They included: Fidelity Investments, Deutsche Asset Management, Varma Sampo, Newton, Morley Fund Management, DWS Investments, M&G, Schroder Investment Management and Robur Kapitalforvaltning.

Deminor claims that the proposed merger exchange ratio “does not reflect the rationale and background of the transaction.”

“The ratio does not constitute adequate consideration for Telecom Italia minority shareholders, especially in light of the burden and risks that would be imposed by Olivetti on Telecom Italia. Nor does the recent performance of the Telecom Italia share price redress the unfairness of the proposed merger terms, “ says the letter.

The merger could be of advantage to Telecom Italia in that it would reduce the principal shareholder’s influence over the company, but argues Deminor: “This alleged benefit could be achieved through other means without the negative impact on the financial position of minority shareholders.”

The letter calls the merger, “a serious failure of Telecom Italia’s corporate governance as well as a notable setback for corporate governance in Italy as a whole, and the protection of minority shareholders in general.”

The ad in the FT cost an estimated 26,000 pounds (36,000), based on the paper's advertising rate card.

In a position statement issues by Deminor in April, the consultant highlighted corporate governance issues involved in the merger such as: violation of corporate interest; lack of independence of the advisers and directors; and conflicts of interest.

Subsidiary Deminor Italia SpA has submitted a detailed analysis of the terms and conditions of the proposed transaction to the Telecom Italia board of directors and its advisors prior to the board’s approval of the transaction. The meeting will take place May 24. Deminor said in April that “based on its experience gained in many similar cases in other countries in Europe, it is confident that the transaction terms can and will be changed.”

Deminor advises institutions holding close to 5% of ordinary shares and 25% of savings shares of Telecom Italia.

Shareholders are increasingly being encouraged to be more active. On Monday shareholders of drugs company GlaxoSmithKline, voted to reject a controversial pay package of the chief executive - the first time a UK blue-chip company has had its pay scheme rejected by shareholders. The US’ largest pension scheme, CalPERS also recently used its shareholder influence to make GSK address its pricing of third world AIDS medication.


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