Telecom Italia reviews KKR’s bid as rival plan emerges

By Elvira Pollina

MILAN (Reuters) – Telecom Italia (BIT:) (TIM) directors will on Friday begin assessing a multi-billion euro bid for its fixed-line grid from U.S fund KKR, part of a government-backed plan opposed by top shareholder Vivendi (OTC:) and challenged by other minority investors.

The sale of the grid is the centrepiece of TIM Chief Executive Pietro Labriola’s plan to revive the former phone monopoly which has been under pressure due to cut-throat competition on it home turf and its debt burden.

KKR’s binding bid expires on Nov.8, but that date can be extended until Dec.20 upon a request from TIM.

After an initial review on Friday, TIM directors will gather again on Sunday to decide whether to back the KKR deal after months of negotiations with the U.S. fund.

KKR has made a binding offer for TIM’s main network infrastructure that values it at around 23 billion euros ($24.4 billion), including debt and some variable components, sources have said.

COUNTERPLAN EMERGES

Under Labriola’s plan to sell the grid, cash-burning TIM would shed about half of its 40,000 domestic staff and cut its 26 billion euro net debt pile to focus on its service operations.

The deal has been endorsed by Prime Minister Giorgia Meloni’s administration, which authorised the Treasury to take a 20% stake in the grid for up to 2.2 billion euros to oversee an asset deemed as strategic.

Italian infrastructure fund F2i is also preparing to take a stake to bring the holding in Italian hands to 30-35%.

Leading shareholder Vivendi is seeking a higher price and questioning the sustainability of the remaining service business.

The French media giant, which holds a 24% stake, is also ready to bring a legal challenge to the grid deal.

The grid sale has also been challenged by an alternative strategy from London-based investment firm Merlyn Advisors and former TIM executive Stefano Siragusa.

Their counter-proposal calls for TIM to retain its network business and combine it with state-backed rival Open Fiber to create a wholesale-only network operator with state lender CDP as key investor. It also envisages selling off TIM’s domestic operations and its prized Brazilian business.

Merlyn and Siragusa, who represent a group of investors owning under 3% of TIM, want the board to oust Labriola and could throw a spanner in the works at any shareholder vote on the deal. ($1 = 0.9411 euros)