Telecom Italia Enters Exclusive Talks With KKR for Grid Sale

Telecom Italia SpA began exclusive talks with US private equity firm KKR & Co. over the sale of its grid network in an attempt to slash debt, according to a statement on Thursday.

(Bloomberg) — Telecom Italia SpA began exclusive talks with US private equity firm KKR & Co. over the sale of its grid network in an attempt to slash debt, according to a statement on Thursday.

Telecom Italia’s board of directors unanimously agreed to mandate Chief Executive Officer Pietro Labriola to seek an improved, binding offer by Sept. 30, the company said. The deal is valued as much as €23 billion ($25 billion), people familiar with the matter told Bloomberg earlier this month.

Read More: Telecom Italia Nears Picking KKR for Grid Sale Negotiations

The sale of its most valuable asset would be transformative for Telecom Italia and it would be a first for a European carrier. The board decision marks a preliminary victory for Labriola, who has been working on grid sale to cut the company’s €30 billion gross debt for more than a year.

Still, a definitive agreement is not assured. Telecom Italia’s largest shareholder, the French media-conglomerate Vivendi SE, has repeatedly said it values the grid at around €30 billion and could still seek to halt the network sale process by calling an extraordinary shareholders meeting, according to the people.

Telecom Italia said KKR’s offer is preferable in terms of execution and timing, and higher than the competing bid submitted by the consortium formed by Italy’s state lender Cassa Depositi e Prestiti SpA and Macquarie Asset Management.

Former Monopoly

Telecom Italia, a former monopoly, faces a complex mix of high labor costs and ever-higher investments to modernize its network infrastructure. Grid separation has been debated in Italian industry and politics for more than a decade, with details and deal outlines shifting constantly.

Prime Minister Giorgia Meloni has signaled that she considers Telecom Italia’s network a strategic asset that must retain a degree of public oversight. Italy’s government has the right to veto deals involving strategic assets, and Rome’s desire to safeguard the company’s 40,000 employees means that any offer without state backing would face significant hurdles.

–With assistance from Antonio Vanuzzo.

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