Tiscali 2007 Annual Report Download - page 39

for the subscription of the same amount of ordinary Tiscali
S.p.A. shares. It will be possible to exercise the options between
29 June 2010 and 28 December 2010, at an exercise price
of EUR 2.378 per option, equating to the arithmetic average
of the Official Stock Exchange Prices of the Company’s shares
in the month prior to the resolution of the Board of Directors,
in compliance with applicable tax legislation. On 27 and 28
February 2008, the Board of Directors resolved to adjust the
exercise price of the options allocated to the employees by
means of the application of a ratio of 0.896756, identical to
that published by Borsa Italiana on 11 January 2008 which
was used to adjust the option and futures contracts on Tiscali
shares consequent to the share capital increase for around
Euro 150 million concluded on 22 February 2008. The exer-
cise price for the options allocated to the employees there-
fore currently stands at EUR 2.132 per share.
The aim of the plan is to align the interests of management
with the creation of value for the Tiscali Group and its share-
holders, thereby encouraging the achievement of the strate-
gic objectives.
The aforesaid plan, meant for the Italian management of Tis-
cali Group, goes together with the remuneration plan based
on shares, allocated to the English management of the Group
in 2007. Such plan provides for the allocation of a certain
number of options to 20 English managers; those options may
be converted into shares of the subsidiary Tiscali UK Ltd, and
their number must not exceed 5% of the share capital of such
company, net of the dilution.
The exercise price must be fixed on the basis of the equity
value of the English subsidiary, at the time of their allocation.
Those options will mature in a three-year period starting from
the allocation, and may be exercised for ten years, still from
the allocation date.
Acquisition of the Pipex broadband and voice division
On 13 July 2007, Tiscali and Pipex Communications Plc
entered into an agreement for the acquisition by Tiscali UK
Holdings Limited of Pipex’s broadband and voice division. The
Enterprise Value agreed for the acquisition came to GBP 210
million (approximately EUR 310 million). The acquisition was
approved by Pipex’s shareholders’ meeting and by the UK
Office of Fair Trading on 17 August and was formalized on 13
September 2007. The final price was established as GBP 187
million (around EUR 273 million).
The acquisition of Pipex’s broadband and voice division fur-
ther enhances Tiscali’s position among the leading market
operators for the integrated supply of telecommunications and
media services. Thanks to this acquisition, important syner-
gies and efficiencies may be achieved, in particular on the
integration of the network, the migration of the customers and
the reduction of the indirect costs. The acquisition was financed
by means of a credit facility of EUR 650 million granted by
IntesaSanPaolo and JP Morgan.
Raising of a new loan and partial repayment using a share
capital increase
The credit facility of EUR 650 million granted by Intesa San-
paolo and JPMorgan comprises the following elements: a bridg-
ing loan pertaining to a market debt transaction for EUR 400
million, a bridging loan for a share capital increase of EUR
150 million, a credit facility of Banca IntesaSanPaolo for EUR
50 million and a line of liquidity, unused at present, for EUR
50 million.
The credit facility of EUR 650 million (of which EUR 600 mil-
lion disbursed) essentially replaced the previous loan with
Banca Intesa SanPaolo (for EUR 280 million) and with Bar-
clays (for around EUR 53 million), and financed the acquisi-
tion of Pipex.
This total amount was reduced by means of recourse to a
share capital increase approved by Tiscali’s shareholders’
meeting on 31 August 2007, concluded on 22 February 2008.
It is also envisaged that the loan of around EUR 400 million
may also be replaced by means of recourse to market debt
instruments. If the market debt transaction does not take
place by September 2008, the bridging loan will transform
into a long-term payable falling due on 13 September 2014.
The credit facility of EUR 50 million already disbursed, and
that made available, will both fall due in September 2011.
Approval of the 2008-2012 Business Plan
On 26 November 2007, the Company’s Board of Directors
approved the 2008-2012 business plan which outlines the
new strategic approach and the financial targets of the Tiscali
Group and its subsidiaries in Italy and the UK. In detail, the
business plan aims to (i) enhance the Group’s competitive
position, (ii) maximize the creation of value over the short/medi-
um-term and (iii) guarantee further infrastructural and serv-
ice developments which will make it possible to compete with-
in more complex market scenarios.
Redefinition of the area of the activities in Italy
As part of the process aimed at simplifying the Group’s legal
structure and achieving greater operating efficiency, on 26
November 2007 Tiscali’s Board of Directors approved the
merger of Tiscali Italia S.p.A. and Tiscali Services S.p.A..
Therefore, as at 6 December 2007 Tiscali S.p.A. transferred
the entire share capital of the subsidiary Tiscali Services S.p.A.
to the subsidiary Tiscali Italia S.p.A. at the company’s share-
holders’ equity value at 31 October 2007 equating to EUR
29,461,116.00 and (ii) subsequently, on 10 December 2007,
the boards of directors of Tiscali Italia S.p.A. and Tiscali Ser-
vices S.p.A. authorized the approval of the project for the
merger through incorporation of Tiscali Services S.p.A. with-
in Tiscali Italia S.p.A. It is envisaged that the merger deed will
be drawn up during the first few months of 2008, and will
have a retroactive effect as at 1 January 2008.
REPORT ON OPERATIONS
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