Italy’s state lender plans to drop its offer for Telecom Italia SpA’s landline network, ending a bidding war with KKR & Co. for control of the carrier’s most valuable asset, according to people familiar with the matter.
(Bloomberg) — Italy’s state lender plans to drop its offer for Telecom Italia SpA’s landline network, ending a bidding war with KKR & Co. for control of the carrier’s most valuable asset, according to people familiar with the matter.
The lender, Cassa Depositi e Prestiti SpA, partnering with Australia’s Macquarie Asset Management, already raised its bid last month, but it’s now pulling the plug on that plan, the people said, asking not to be named detailing confidential deliberations. Back in April, Cassa Depositi, known as CDP, valued the network at €19.3 billion ($21 billion), people familiar said at the time.
Concerns over antitrust issues may have played a part in the decision, they said, adding that the lender could have a role in a future phase of a network deal. No final decision has been taken and plans could change, the people said.
Spokespeople for Telecom Italia, the Italian government and CDP declined to comment. Macquarie wasn’t immediately available to comment.
Telecom Italia bonds fell across the board on Monday afternoon on the news CDP had dropped its bid. The notes maturing in 2033 were down by around a quarter of a point to 106.9, according to CBBT pricing compiled by Bloomberg.
Telecom Italia’s board earlier this month asked the two bidders for its landline network to increase their offers after an internal review found them “not yet adequate.” So far only KKR has expressed willingness to improve its offer, according to people familiar.
The carrier has said it wants final bids for the network by June 9. Rome has been monitoring the possible employment fallout of the deal to limit any potential impact with the government having special powers on the strategic asset.
The Italian government, which owns almost 10% of the carrier through CDP, holds so-called “golden power” rights to veto possible offers on assets deemed to be of strategic national value. Giorgia Meloni’s government has reiterated several times that it wants to keep the network under public control.
Italy’s rightwing cabinet wouldn’t oppose if the two contenders for the landline network were to join forces, people familiar said earlier this month. CDP could get a minority interest with other Italian investors in KKR’s bid, the people said.
KKR’s improved bid values the network at €21 billion, the people said. That figure includes debt and €2 billion in a performance-based “earnout,” which would provide future compensation if the business achieved certain financial goals, they said.
Telecom Italia Chief Executive Officer Pietro Labriola is committed to an asset disposal plan aimed at cutting the company’s €30 billion gross debt pile.
–With assistance from Alessandra Migliaccio, Thomas Seal, Sonia Sirletti and Giulia Morpurgo.
(Updates with bonds in fifth paragraph.)
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