KKR & Co. submitted an offer for Telecom Italia SpA’s landline grid, even as the long-awaited binding bid excluded the heavily indebted company’s subsea cable unit and raised questions about possible delays. The shares fell in Milan.
(Bloomberg) — KKR & Co. submitted an offer for Telecom Italia SpA’s landline grid, even as the long-awaited binding bid excluded the heavily indebted company’s subsea cable unit and raised questions about possible delays. The shares fell in Milan.
Telecom Italia said Monday it received KKR’s bid for its domestic grid unit and that the binding offer will be considered by the company’s board “without delay” following analysis. The phone carrier did not divulge further details or a price in its statement.
Still, the deal could face new hurdles, Bloomberg Intelligence telecommunications analyst Erhan Gurses wrote in a note, as the binding bid excludes Telecom Italia’s subsea cable unit Sparkle, for which KKR made a separate, non-binding bid. The unit carries a reported valuation of €1.2 billion ($1.3 billion), Gurses said.
The US firm has valued the Telecom Italia network — with Sparkle — at as much as €23 billion, including some earn-outs, people familiar with the matter said earlier.
In addition, the final word on a network sale may come from outside Italy. Telecom Italia’s largest shareholder, French media conglomerate Vivendi SE, has signaled its opposition to the deal, repeatedly warning it won’t accept any network offer below €30 billion.
Telecom Italia shares plunged as much as 4.2% in morning trading on Monday.
Finance Ministry Role
Under the plan Italy’s Finance Ministry would take up to a 20% stake in the grid unit for as much as €2.5 billion. The network offer expires on Nov. 8 but it could be extended to Dec. 20, Telecom Italia said. A binding offer for Sparkle from KKR is expected within 4-8 weeks, the Italian company said.
Prime Minister Giorgia Meloni has signaled that she considers Telecom Italia’s network a key asset that must retain a degree of public oversight, and the state has a veto over deals involving strategic assets.
Italian infrastructure fund F2i SGR SpA plans to join KKR in the bid, a partnership that would facilitate such oversight, people familiar with the matter said earlier this year.
The network sale, the brainchild of Telecom Italia Chief Executive Officer Pietro Labriola, would be a milestone for the Milan-based company as it looks to slash its gross debt pile of around €30 billion. It would also be the first such move by any European telecoms group, partly due to the unique conditions in the Italian sector.
Italy has one of the world’s most competitive telecoms markets and competition has heated up in recent years with the entrance of new players like Iliad SA. The French operator entered the Italian mobile market in 2018, positioning itself as a no-frills specialist and sparking a cutthroat price war.
Read More: Apple Acquisition Pitch Was High-Water Mark for Telecom Italia
The KKR bid is a significant step toward completing the separation of the network from the rest of the carrier’s business, and it could lead to a significant reduction in net debt, Ernesto Bisagno, Senior Credit Officer at Moody’s, said in an emailed statement on Monday.
(Updated with BI analyst, Moody’s from third paragraph.)
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