KKR has launched a bid of more than 33 billion euros to privatize Telecom Italia in what would be one of the largest equity buyouts of a European company in history.
In a statement released after a board meeting on Sunday, Telecom Italia said the US buyout fund offered € 0.505 per share in cash – a 45% premium over the company’s closing price on Friday, which would give the company a net worth of € 10.7. billion. He has about 22.5 billion euros in net debt.
Telecom Italia said KKR’s offer was meant to be friendly, in that it would have to be approved by the members of the company’s board of directors, and was subject to a four-week due diligence period and approval by the Italian government, which has a veto right. following a takeover of the group.
The board gave no indication as to its approval of the deal.
KKR’s offer has also attracted interest from competing funds, with CVC and Advent being “open” to discussions with stakeholders, according to a CVC spokesperson in Milan.
The offer from the Italian group, whose market value fell to 7.5 billion euros, is the latest sign of private equity interest in the European telecoms sector. The funds seek to dismantle businesses, separate networks from mainstream businesses, realize value or improve business performance.
KKR already has a 37.5% stake in Telecom Italia’s “last mile” network, but has made a full company-wide offer.
This is the latest twist in the history of Telecom Italia, which was the subject of a bitter struggle for control four years ago between the French investor Vivendi and the American activist fund Elliott Management. This followed failed attempts by Telefónica of Spain and AT&T of the United States to buy the company. It has struggled in recent quarters and issued two earnings warnings in three months this year, weakening its position.
Its shares have fallen by a quarter since June and by almost two-thirds since 2018, putting pressure on Luigi Gubitosi, the Italian establishment figure who was appointed chief executive that year, to turn the company around. A board meeting was scheduled for November 26 to discuss a possible management overhaul.
Vivendi has denied that it is in talks with KKR or CVC – as had been reported – or any other institution about a possible transfer to Telecom Italia. The French company is Telecom Italia’s largest shareholder with a 24 percent stake, followed by state lender Cassa Depositi e Prestiti, which owns nearly 10 percent.
“Vivendi is a long-term shareholder and we want to work with the government and other institutions to get Telecom Italia back on track,” the company said. “We are not satisfied with the performance. . . The important thing is to prevent this ship from sinking.
Telecom Italia was Europe’s largest telecommunications company in the 1990s, but has gone from crisis to crisis over the past two decades. It is a politically important undertaking and the government has “golden power” to block takeovers or sales of assets that are not considered to be in the national interest.
The prime minister’s office and Cassa Depositi e Prestiti declined to say whether Rome plans to exercise its veto power over foreign takeovers of strategic assets.
The Italian Treasury said interest in Telecom Italia “is good news for the country” and that the government “will carefully assess its prerogatives”.
“The government’s aim is to ensure that these projects are compatible with the rapid completion of the ultra-wide network as outlined in Italy’s EU stimulus plan,” the Treasury added.
Officials in Rome have said the government will follow developments closely and will not abandon its oversight of assets it considers “strategic” such as Telecom Italia’s main network and its high-density Sparkle cables.
According to several people in Rome, KKR is prepared to split the company in two and hand control of Telecom Italia’s network to a state-controlled entity such as Cassa Depositi e Prestiti. Such a move would conflict with other telecom buyouts, including Macquarie’s takeover of TDC in Denmark, where funds have targeted ownership of valuable network assets as they seek to split up telecoms companies. .
Rome is not opposed to such a project, but “will be examining several options” in the coming weeks, residents said.
They said KKR asked Telecom Italia for a response to its offer, which was first reported by Corriere della Sera, within four weeks.
KKR is one of the most active investors in European telecoms. It bought a minority stake in Telecom Italia’s secondary network for 1.8 billion euros last year through its infrastructure arm and was part of a consortium of private equity groups that deprived the telecommunications operator Spanish MasMovil in a 5 billion euro deal last year. It bought Hyperoptic, a UK fiber optic company, in 2019.
The US takeover group previously approached Dutch telecommunications operator KPN with a takeover offer, which was rejected this year.
Additional reporting by Sarah White in Paris and Emma Agyemang in London