KKR & Co. has made a non-binding bid for a stake in Telecom Italia SpA’s multi-billion-euro network, the Italian carrier said on Thursday, as Chief Executive Officer Pietro Labriola seeks to turn the business around.
(Bloomberg) — KKR & Co. has made a non-binding bid for a stake in Telecom Italia SpA’s multi-billion-euro network, the Italian carrier said on Thursday, as Chief Executive Officer Pietro Labriola seeks to turn the business around.
The shares gained as much as 14% in Milan on Thursday following the announcement of the bid.
Telecom Italia has struggled under a gross debt pile of more than €30 billion ($33 billion), which has become more burdensome as interest rates have risen. Industry veteran Labriola could use the proceeds from the sale of the network to slash the debt.
KKR already owns a minority stake in Telecom Italia’s FiberCop unit. In 2021, the phone carrier rejected an offer from the US private equity fund to purchase the whole business for €10.8 billion. The bid announced Thursday did not specify what size stake KKR is seeking in the network, with Telecom Italia saying in a statement that it is still to be defined.
The phone carrier’s subsea cable unit Telecom Italia Sparkle SpA is among the grid assets targeted in the KKR bid, according to the statement. Telecom Italia will hold a board meeting Thursday to discuss the offer.
Read more: KKR Seeks Italy State Involvement for Telecom Italia Network
Telecom Italia had been holding separate talks with state lender Cassa Depositi e Prestiti SpA — the government’s financial arm — for an alternative deal that could eventually involve a merger of the network with smaller state-backed rival Open Fiber SpA. Cassa Depositi owns about 10% of Telecom Italia and controls Open Fiber.
The government led by Prime Minister Giorgia Meloni has said it wants to retain control over the network, suggesting it might weigh imposing so-called golden power rules to block or limit foreign control over assets deemed to be strategic.
Responding to the bid, the government said Thursday that keeping Telecom Italia’s workforce and safeguarding the network’s security are key and that it will follow developments of a possible deal on that basis.
Telecom Italia has also clashed over strategy with its largest shareholder, French media giant Vivendi SE, which owns almost 24% of the carrier. Last month Vivendi began seeking a reshuffle of Telecom Italia’s board after the French company’s Chief Executive Officer Arnaud De Puyfontaine resigned as a director at the carrier.
Vivendi wants to accelerate a turnaround at the former phone monopoly, people familiar with the matter said in January. Vivendi is also seeking to replace the phone carrier’s Chairman Salvatore Rossi, they said.
No Alternative
Telecom Italia executives and the government in December discussed a possible disposal of the Tim SA Brazil unit, the carrier’s second-most important asset, people familiar with the matter told Bloomberg last week.
The idea was subsequently shelved to focus on the network sale. In order to make a dent in the company’s debt Tim SA, which contributes about 30% of Telecom Italia’s profit, would have had to fetch a price equivalent to nearly double its current share value, the people said, citing an internal review by the company.
Telecom Italia managed to keep its debt under control in the last three months of 2022, people familiar with matter had said earlier.
The embattled company will report net debt after leases of about €20 billion in its year-end results, the people said.
–With assistance from Chiara Remondini.
(Updates with KKR holding, CDP from third paragraph.)
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