KKR bids for Telecom Italia’s fixed-line business

KKR is set to make a non-binding offer to buy Telecom Italia’s fixed-line business, according to people briefed on the matter.

The proposal, which could be sent to Telecom Italia’s board as early as Thursday, could open up the debt-ridden company’s future impasse.

Recent discussions about Telecom Italia’s future have focused on separating its fixed network assets from its services operations, with the fixed line business taking on most of the group’s 25.5 billion euro debt and staff.

Numerous meetings between Italian government officials and Telecom Italia’s main shareholders have been unsuccessful due to differences in the company’s valuation and other sensitive issues such as staffing and debt.

Italy’s new right-wing government coalition has defended a publicly controlled network.

Italian state investor Cassa Depositi e Prestiti, which holds a 10 percent stake in Telecom Italia, has recently expressed interest in buying landline assets. But he disagreed on the company’s valuation with its largest shareholder, French media company Vivendi, and said several people were briefed on the talks.

Vivendi, which has spent around 4 billion euros to build its 24 percent stake, faces a potential loss of 3 billion euros at Telecom Italia’s current market price. Vivendi is seeking a 31 billion euro valuation to support the sale, people briefed on the talks with CDP said.

KKR, which currently owns a 37.5 percent stake in Telecom Italia’s last-mile network, FiberCop, has notified the Italian government of its intention to bid for Telecom Italia’s fixed-line business, the people said.

The New York-based private equity group, which made a bid for all of Telecom Italia in 2021 that would value it at 33 billion euros including debt, wants the Italian government to be a major shareholder in the bid, two people told the FT. .

KKR’s stake in the Rome-based company’s FiberCop business is valued at around 2.5 billion euros.

Bankers who work with shareholders and investors say KKR’s bid is unlikely to be within Vivendi’s €31 billion target.

The private equity group’s approach was rejected by Vivendi in 2021, saying the offer was too low. KKR’s offer at the time valued Telecom Italia’s equity at around €10.7 billion and its net debt at €22.5 billion. The company’s debt has increased by 3 billion euros since that offer.

“The only certainty about the future of telecommunications is the creation of a controlled national network,” Italian Industry Minister Adolfo Orso said last week. [state investor] Cassa Depositi e Prestiti”.

“Other investors can also participate in this project,” Urso added.

The Italian government gave KKR the green light to make the non-binding offer this week, two people involved in the talks said.

Rome wants to secure the jobs of Telecom Italia’s 40,000 domestic employees and also wants to take control of Sparkle’s landline network and submarine cable unit, which it considers strategic assets.

Last month, Arnaud de Puyfontaine, Vivendi’s chief executive, resigned from Telecom Italia’s board, citing a new phase of constructive negotiations between shareholders and the Italian government.

“It is fundamental that all parties involved may be free to benefit in a constructive and transparent manner [Telecom Italia] and all its shareholders,” he said in a statement at the time.

La Repubblica first reported that KKR were planning a non-binding bid.

KKR declined to comment.

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