KKR has launched an offer of more than € 33 billion to take Telecom Italia privately in what would be one of the largest private equity acquisitions of a European company in history.
In a statement issued after a board meeting on Sunday, Telecom Italia said the US buyout fund had offered € 0.505 per share in cash – a 45 per cent premium to the company’s closing price on Friday giving the company an equity value of € 10. 7 would give bn. It has about € 22.5 billion in net debt.
Telecom Italia said the KKR offer was intended to be friendly, in that it had to be approved by the company’s board members, and was subject to a period of four weeks of due diligence and the approval of the Italian government, which has a veto. about a takeover of the group.
The board did not indicate whether it would approve the deal.
The KKR offer also sparked interest from competitive funds, with CVC and Advent “open” for stakeholder discussions, according to a CVC spokesperson in Milan.
Shares in Telecom Italia rose 22 percent to € 0.42 on Monday morning.
The offer for the Italian group, whose market value fell to € 7.5 billion before it went public, is the latest sign of private equity interest in the European telecommunications sector. Funds want to break up businesses, separate the networks of the consumer businesses, realize value or improve the performance of the companies.
KKR already has a 37.5 percent stake in Telecom Italia’s “last mile” network, but has made a full offering for the entire company.
This is the latest twist in the history of Telecom Italia that has been the subject of a bitter tug of war for control four years ago between French investor Vivendi and US activist fund Elliott Management. This followed aborted attempts by Telefónica of Spain and AT&T of the USA to buy the business. It has struggled in recent quarters, issuing two profit warnings in the span of three months this year that have weakened its position.
Before the news of the KKR offer, its shares have fallen by a quarter since June and almost two-thirds since 2018, increasing pressure on Luigi Gubitosi, the Italian business figure. CEO appointed that year, to turn the company around. A board meeting is scheduled for November 26 to discuss a possible management overhaul.
Vivendi denied that he was in talks with KKR or CVC – as reported – or any other institution about a possible move for 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 most important thing is to stop this ship from going down. ”
Telecom Italia was Europe’s most valuable telecommunications company in the 1990s, but has swung from crisis to crisis over the past two decades. It is a politically important company and the government has a “golden power” to prevent acquisitions or asset sales that are not considered to be in the national interest.
The prime minister’s office and Cassa Depositi e Prestiti declined to comment on whether Rome plans to exercise its veto power over foreign takeovers of strategic assets.
Italy’s Treasury said interest in Telecom Italia “was good news for the country” and that the government would “carefully evaluate its prerogatives”.
“The government’s objective is to ensure that these projects are compatible with the rapid completion of the ultra-broad network set out in Italy’s EU recovery plan,” the treasury added.
Officials in Rome said the government would closely monitor developments and that it would not relinquish its oversight of assets it considered “strategic”, such as Telecom Italia’s primary network and its Sparkle high-density cables.
According to several people in Rome, KKR would be willing to split the company in two and leave the controlling interest of Telecom Italia’s network to a state-owned entity such as Cassa Depositi e Prestiti. Such a move would clash with other telecommunications acquisitions, including Macquarie’s acquisition of TDC in Denmark, where funds have targeted ownership of valuable network assets when splitting telecommunications businesses.
Rome is not opposed to such a project, but will “look at various options” over the next few weeks, the people said.
They said KKR had 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 telecommunications. It bought a minority stake in Telecom Italia’s secondary network for € 1.8 billion last year through its infrastructure division and was part of a consortium of private equity groups that privately took Spanish telecommunications operator MasMovil last year. a € 5 billion transaction. He bought Hyperoptic, a British fiber company, in 2019.
The US buyout group has previously approached Dutch telecommunications provider KPN with a takeover offer, which was rejected this year.
Additional reporting by Sarah White in Paris and Emma Agyemang in London