Telefonica Tightens Grip on Telecom Italia

While we don't believe in paying too much attention to buyout rumors and speculating on potential takeover targets, Fools should definitely try to keep up with M&A news that is officially announced -- just in case it's material to our investing thesis.

What: Spanish telecommunications giant Telefonica agreed to boost its stake in Telecom Italia to 70% from 46% over the next few months.

So what: The $1.2 billion multipart deal secured late Tuesday will allow Telefonica to steadily gain control over Telecom Italia's juicy Latin American assets without having to offer a full bid and sidestepping any antitrust opposition in the process. The agreement ends months of speculation surrounding Telecom Italia's plans and puts Telefonica in a nice position to capitalize on the wave of consolidation in the European telecom space.

Now what: While the transaction's structure might be able to circumvent antitrust laws, Italy's unions will almost certainly push regulators to block the deal given the high possibility of significant job cuts. "This is a very dangerous deal because all the issues of Telecom Italia remain, starting from huge debt and the need for new, real investments," said Michele Azzola, secretary general of Slc-Cgil, Italy's biggest telecom union. I wouldn't bet too heavily on the deal getting done just yet.

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The article Telefonica Tightens Grip on Telecom Italia originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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