US investment fund KKR has offered EUR 10.8 billion in total to take Telecom Italia (TIM) private in an approach it describes as friendly. In a statement, TIM said its board met under chairman Salvatore Rossi to discuss the “non-binding and indicative” buyout offer at a price of EUR 0.505 per ordinary and saving share, a premium of around 45 percent on the price of the company’s ordinary shares. It added that the offer would be conditional upon a minimum level of acceptance of 51 percent for both classes of shares.
The operator also indicated that KKR’s plan would only be able to proceed with the government’s approval as TIM is subject to “golden power” anti-takeover powers to protect companies considered of strategic importance from foreign bids. KKR’s move comes after TIM held a board meeting to discuss strategy at the request of its leading shareholder Vivendi following two profit warnings in around 3 months.
The operator confirmed the position of TIM CEO Luigi Gubitosi following the meeting but Vivendi is reportedly pushing to replace the chief executive and believes KKR’s offer does not adequately value the operator, according to an unnamed source cited in a Reuters report. Vivendi paid an average of EUR 1.07 a share for its 23.8 percent stake in TIM and would face a steep capital loss at KKR’s current offer price.
The US fund last year acquired a 37.5 percent stake in TIM’s last-mile fibre and copper grid company FiberCop for EUR 1.8 billion and would have to assume the operator’s EUR 29 billion gross debt if its buyout offer succeeds. According to Reuters, two sources close the matter said KKR’s plan could see TIM carve out its fixed network to be run as a government-regulated asset along the model used by energy and gas grid companies Terna and Snam.
The report adds that private equity firms CVC and Advent have also studied possible plans for TIM and are working with former TIM CEO Marco Patuano, now a senior adviser to Nomura in Italy.
In its statement, TIM said KKR's offer is conditional on the outcome of a four-week due diligence analysis as well as on the government’s backing. In that regard, a separate Reuters report indicated that the government’s decision on whether to use special powers to block unwanted foreign interest on strategic companies would hinge on plans for TIM’s network.
The acquisition is part of a series of investments by KKR in the telecom sector, focusing especially on fibre. In addition to the stake in FiberCop, the US investment firm recently agreed a joint takeover of data centre operator CyrusOne and started FTTH network joint ventures in the Netherlands (Open Dutch Fiber) and Colombia (with Telefonica).
Previous investments included German operator Deutsche Glasfaser and French towers venture Hivory. KKR also made an unsolicited bid for Dutch incumbent KPN earlier this year, but was swiftly rejected.
