Telecom Italia Raider Colaninno Plots Fiat Move

Italian entrepreneur Roberto Colaninno, who masterminded a 1999 takeover of Telecom Italia, is developing an 8 billion euro ($8.4 billion) plan to rescue industrial group Fiat, a newspaper reported on Monday.

La Repubblica said on its web site the plan envisaged the cash being pumped into Fiat's struggling Fiat Auto unit, with some of the funds raised by the sale of the group's aviation arm Fiat Avio and insurance division Toro.

An option allowing Fiat to sell its remaining 80 percent of Fiat Auto to U.S. car giant General Motors Corp from 2004 could be dropped, possibly in return for support for Fiat. A spokesman for Colaninno declined to comment on the report. La Repubblica said its information came from investment banks.

Fiat's shares have sunk to near 20-year lows on the group's failure to turn around slumping car sales and its slow progress in selling assets to cut debts. Last week, ratings agency Moody's cut the battered car maker's debt rating to "junk."

La Repubblica said Fiat's founding Agnelli family would remain key shareholders via their holding companies but Colaninno would become the group's core investor and manager, seeking to build a circle of controlling stakeholders over time.

Colaninno took over Telecom Italia in 1999 before he was ousted in 2001. He has long been rumoured to be looking for a way back into the inner circle of Italian business and he recently stoked speculation that he was thinking of some big deals by creating a new investment vehicle.

Fiat's creditor banks saw the plan as a possible solution and unions were likely to approve of doing away with the possibility of the car arm being run by GM, La Repubblica said. But Umberto Agnelli, head of the Agnellis' family holdings, was concerned about a possible break-up of the group and Colaninno was prepared to sign a pact on future selloffs.

A block trade of 2.1 percent of Fiat's ordinary shares changed hands on Monday at a 30 percent premium to prices on the open market. Colaninno's spokesman denied he was involved.