Telecom Italia has announced that its board will meet to discuss a non-binding offer from KKR to buy a stake in the company's fixed-line business. The offer involves a spin-off between the company's network assets and service operations.
Telecom Italia is considering splitting the company into two separate entities with the fixed-line business taking on the majority of the group's debt and employees. KKR has made a non-binding offer to purchase a stake in a new company that would manage Telecom's fixed-line network and infrastructure, including the last mile network and a stake in Sparkle, the submarine cable unit.
This statement mentions that a US fund holds a 37.5% stake in Fibercop, a subsidiary of Telecom Italia, valued at €2.5 billion. The meetings between the Italian government and Telecom Italia's shareholders have not resulted in a solution due to disagreements on the company's valuation and other factors.
The Italian government has announced that it will evaluate a new deal related to the country's telecommunications infrastructure based on the protection of jobs and the security of the infrastructure. Telecom Italia, which has 40,000 employees in Italy, is involved in the deal. The new right-wing government coalition supports a publicly controlled network.
Cassa Depositi e Prestiti, Italy's state-backed investor, has expressed interest in buying the fixed-line assets of Telecom Italia, in which it owns a 10% stake. However, there is a disagreement over the company's valuation with its largest shareholder, French media conglomerate Vivendi. Vivendi, which has a 24% stake in Telecom Italia and has invested €4 billion, is seeking a valuation of €31 billion to back the sale. The current market price puts Vivendi at risk of losing €3 billion.
KKR, a private equity group based in New York, made an offer for Telecom Italia in 2021, valuing it at €33 billion including debt. The group wants the Italian state to be a significant shareholder as part of the offer. However, bankers believe KKR's offer is unlikely to meet Vivendi's €31 billion target. Vivendi rejected KKR's initial proposal in 2021, saying the offer was too low. KKR valued Telecom Italia's equity at €10.7 billion and its net debt at €22.5 billion at the time. The company's debt has risen by €3 billion since the offer was made.
Adolfo Urso, Italy's industry minister, stated that a national network controlled by Cassa Depositi e Prestiti will be the only certainty in Telecom Italia's future. He added that other investors can participate in the project. The statement followed the resignation of Vivendi CEO Arnaud de Puyfontaine from Telecom Italia's board, citing the need for constructive negotiations between shareholders and the government. The news led to a 11% increase in Telecom Italia's shares in early trading.
Reference: Financial Times , Bloomberg