A counter-offer by Italy’s state-backed lender for Telecom Italia SpA’s landline network — the carrier’s core asset — will be aimed at topping a previous bid from KKR & Co. bid, according to people familiar with the matter.
(Bloomberg) — A counter-offer by Italy’s state-backed lender for Telecom Italia SpA’s landline network — the carrier’s core asset — will be aimed at topping a previous bid from KKR & Co. bid, according to people familiar with the matter.
The offer from the lender, Cassa Depositi e Prestiti SpA, known as CDP, along with Macquarie Group Ltd is set to be presented next week, said the people, who asked not to be named before the deal is public. Telecom Italia’s board will meet Feb. 24 to review the deal.
KKR’s bid, which includes a €2 billion ($2.1 billion) performance-based “earnout” portion, valued the unit at about €20 billion including debt, the people said. CDP would top that valuation by including Telecom Italia’s smaller rival Open Fiber SpA in the offer, the people said. The bid could include a higher proportion of cash than KKR is offering, to attract interest from the carrier’s board.
KKR’s bid also set a value of about €1.5 billion for Telecom Italia’s Sparkle subsea cable unit, but the US investment firm likely would not be able to fully control that asset as Rome deems it to be of strategic value and subject to rules that allow it to block or limit foreign ownership.
CDP, which owns about 10% of Telecom Italia and controls Open Fiber, is prepared to value the grid assets at about €17 billion, the people said, adding that the figures involved remain subject to change.
The CDP bid has yet to be finalized and still needs backing from Prime Minister Giorgia Meloni’s government, according to the people. Rome has periodically reiterated that it wants to control the network.
Representatives for CDP, Telecom Italia and KKR each declined to comment.
With Open Fiber included, the CDP offer could total more than €23 billion in terms of valuation, daily Il Messaggero reported Friday, without citing sources.
What Bloomberg Intelligence says:
The potential joint bid for Telecom Italia’s fixed grid, valuing it at €23 billion including Open Fiber (€18 billion standalone), implies a 12x EV/2021 Ebitda multiple, contrasting with the 17x Vivendi asked last July. The offer is a marginal improvement over KKR’s 10x reported bid, but could give Telecom Italia a 42% stake in a combined NetCo-Open Fiber entity, retaining exposure to a cash-generative single network, while pushing debt off the balance sheet if antitrust approval is mustered.
Erhan Gurses, Bloomberg Intelligence tech, media and telecoms analyst
Talks on a potential CDP bid for Telecom Italia’s network have been going on for months, and the lender has taken a central role in efforts to shore up the beleaguered phone carrier and reduce its massive debt. The state lender owns 60% of Open Fiber, with the remainder held by Macquarie.
Telecom Italia Chief Executive Officer Pietro Labriola is seeking to sell the network to cut the company’s net debt of about €20 billion, which has become more burdensome as interest rates have risen.
–With assistance from Chiara Albanese and Alessandra Migliaccio.
(Updates with Bloomberg Intelligence after eighth paragraph.)
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