Italiaonline, the Internet company controlled by Egyptian businessman Naguib Sawiris, has agreed to take over Italian directories firm Seat Pagine Gialle to create a leading online advertiser.
Under the deal, two top Seat shareholders will give Italiaonline 53.9 percent of Seat share capital in exchange for 33.8 percent of Italiaonline's capital, the parties said.
Italiaonline, which provides Internet services for small and medium-sized Italian companies, will then launch a mandatory tender offer for the rest of Seat's capital at 0.0039 euros per share.
At 0815 GMT, shares in Seat were down 10.6 percent at 0.0042 euros.
Directories companies across Europe have been forced into major financial restructuring as the Internet puts business models in doubt and a downturn in advertising takes its toll.
Seat, which struggled to manage debt after a 5.7 billion euro ($6.4 billion) buyout in 2003 by private equity companies, was turned around last year following chapter 11-like proceedings.
The merger of Italiaonline and Seat is expected to be completed before the end of this year, the parties said, adding that Seat would remain listed in Milan.
Italiaonline is a wholly-owned subsidiary of Sawiris's Orascom TMT Investments (OTMTI).
"This investment demonstrates OTMTI's long-term commitment to continue to take part in the development of the Italian TMT sector as well as our interest to further explore the opportunities this great country has to offer," Sawiris said.
Italiaonline was advised by Accelero Capital and Lazard while the Seat shareholders, Avenue Europe International Management and GoldenTree Asset Management, were advised by Mediobanca.