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Telecom Italia faces $12.2B privatization bid from KKR

It was only recently reported that US-based investors KKR wanted to invest more in the fixed-line network of Telecom Italia (TIM) after already having bought a 37.5% stake in TIM's fiber company FiberCop last year.

It now seems that KKR wants to buy up TIM in its entirety and take it private, at a cost of €10.8 billion (US$12.2 billion). TIM also has net debt of about €22.5 billion ($25.4 billion) that any buyer would have to take on.

According to a statement from TIM itself, its board of directors met up yesterday to discuss the "non-binding and indicative" intention of KKR to launch a possible public tender offer for TIM's entire share capital, "aimed at the delisting of the company."

Bargain hunting: Shareholder Vivendi is said to oppose the offer for TIM, rating it too low.  (Source: Arcansel / Alamy Stock Photo)
Bargain hunting: Shareholder Vivendi is said to oppose the offer for TIM, rating it too low.
(Source: Arcansel / Alamy Stock Photo)

TIM said KKR had set an indicative price of €0.505 for its possible buyout offer – which Reuters noted is a 45.7% premium to the closing price of ordinary shares on Friday.

The news caused TIM's shares to rise sharply at the start of trading on Monday morning. TIM pointed out that the operator is subject to the so-called "golden power" of the government to veto any deal.

Board unrest

It's fair to say that TIM has been facing ructions of late. For example, French media giant Vivendi, which holds a 24% stake in TIM, had questioned the role of CEO Luigi Gubitosi following two profit warnings in three months. Indeed, Vivendi has reportedly been unhappy with TIM's recent performance and that of Gubitosi.

As things stand, it's not clear what TIM thinks of KKR's proposal. Reuters, citing unidentified sources, said KKR's plan is to 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.


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To be sure, the operator could use a little help: It is struggling to compete against more nimble rivals such as Iliad Italia as well as Fastweb, Vodafone Italy and WindTre.

According to Reuters, Vivendi believes that KKR's offer does not adequately value TIM. It was also reported that private equity firms CVC and Advent have studied possible plans for TIM, working with former TIM CEO Marco Patuano, now a senior adviser to Nomura in Italy.

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— Anne Morris, contributing editor, special to Light Reading

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