Telecom Italia has received a 10.8 billion euro ($12 billion) offer from U.S. fund KKR aimed at taking the telecom operator private, Reuters reported.
Telecom Italia will hold a second extraordinary board meeting in two weeks on Nov. 26, as an internal war over the role of CEO escalates. TIM’s CEO Luigi Gubitosi battles for survival after coming under fire from top investor Vivendi following two profit warnings in three months.
KKR has set an indicative price of 0.505 euros for its possible buyout offer — a 45.7 percent premium to the ordinary shares’ closing price on Friday. KKR would also offer the same price for TIM’s savings shares.
The TIM board, chaired by former Bank of Italy official Salvatore Rossi, met for several hours on Sunday afternoon but in a short statement it gave no indication of whether it would support the approach. It noted that KKR had termed its action as friendly and aimed at winning the backing of the company and of the government.
Italy’s Treasury said foreign interest in Italian companies was positive news for the country and the market would assess how valid KKR’s plan is were it to materialise.
The government will closely follow developments with a focus on plans for TIM’s fixed-line assets, which would be key in determining whether it uses its veto powers.
Rome has special anti-takeover powers to shield companies deemed of strategic importance from foreign bids.
A new owner would also have to assume TIM’s 29 billion euro gross debt.
Gubitosi brought KKR onboard last year in a 1.8 billion euro deal that handed the New York-based fund a 37.5 percent stake in FiberCop, the unit holding TIM’s last-mile network connecting street cabinets to people’s homes.
KKR’s plan would see TIM carve out its fixed network to be run as a government-regulated asset along the model used by energy grid company Terna or gas grid firm Snam.
The government wants any plans for TIM’s grid to be in line with the goal of rapidly completing broadband rollout across Italy, supported by adequate investments, and protecting jobs, the Treasury said in its statement.
Gubitosi has started looking at ways to squeeze money out of TIM’s assets, revisiting in particular a plan to merge TIM’s fixed-line grid – its most prized asset – with that of fibre optic rival Open Fiber.
Sponsored by the previous government, that project had run aground under Prime Minister Mario Draghi.
Rome, preparing to tap billions of euros of European Union recovery funds to boost broadband connectivity in Italy, is aware of the need to find a way to shore up the former telecoms monopoly and protect its 42,500 domestic workers.
Vivendi, which is pushing to replace Gubitosi, believes KKR’s offer does not adequately value TIM.
Vivendi, which faces a steep capital loss on its 24 percent TIM stake after paying on average 1.071 euros a share, remains ready to work alongside Italy’s authorities and institutions for TIM’s long-term success.
Private equity firms CVC and Advent have also studied possible plans for TIM, working with former TIM CEO Marco Patuano, now a senior adviser to Nomura in Italy.
To oversee a strategic asset such as the fixed line, state investor CDP has taken a 9.8 percent stake becoming TIM’s second-largest investor after Vivendi.
TIM’s revenue has shrunk by a fifth over the past five years hit by aggressive competition at home from rivals such as Iliad, Vodafone, Wind Tre and Fastweb.