Italy Views KKR’s Telecom Italia Bid as Too Low

Italy views an offer from private equity fund KKR for Telecom Italia SpA as too low, people familiar with the matter said, as the government led by Mario Draghi reviews plans to create a single national ultra-broadband network.

State-backed lender Cassa Depositi e Prestiti, which owns 10% of Telecom Italia, currently has a value of 82 euro cents per share on its books for the holding, and would be reluctant to accept KKR’s 50.5 cent per share offer, the people said, asking not to be named discussing confidential matters.

French media conglomerate Vivendi SE, which owns about 24% of the former phone monopoly, has already said the KKR offer does not adequately reflect the company’s value.

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Telecom Italia’s board is scheduled to meet Feb. 14 to discuss an in-house plan, and it could also review KKR’s 10.8 billion-euro ($12.4 billion) bid, the people said. Bloomberg reported late last year that KKR has considered raising its offer price for Telecom Italia to around 70 cents to 80 cents per share to seal a deal.

Spokespeople for Cassa Depositi, Telecom Italia and the government declined to comment.

Telecom Italia shares rose as much as 4.3% in Milan on Thursday, and traded up 2.7% at 10 a.m. local time, giving the company a market value of 9.1 billion euros.

The Draghi administration has set up a committee of ministers and experts to review the possible impact of the deal on jobs, infrastructure and network security. The government has said that any bid would have to offer guarantees on those issues.

Labriola Plan

Telecom Italia’s board last month gave Chief Executive Officer Pietro Labriola a mandate to maximize the value of the company’s infrastructure assets. That plan is aimed at spinning off the carrier’s landline network into a new unit focused on wholesale services, and gaining a solid revenue stream from regulated tariffs, people familiar with the matter said at the time. It could also see all of Telecom Italia’s commercial services spun off into a separate unit.

Labriola also aims to revive the company’s attempt to merge with smaller, state-backed rival Open Fiber SpA — in a long-delayed bid to build a single national phone network and avoid billions of euros in duplicate investments, people familiar with the matter said last month. The project is in line with the government’s desire to build a single fiber-network infrastructure to boost digital services, they said.

Advisers for Telecom Italia and Open Fiber recently revived talks on a project to build a single network, according to people familiar with the matter. The process could be move forward in a number of incremental stages, starting with a commercial agreement and network-sharing in rural areas, they said. The plan could be announced as early as Monday, Italian daily Il Messaggero reported.

Source: Yahoo Finance

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