Telecom Italia was holding an emergency board meeting on Sunday to evaluate a takeover offer from US private equity group KKR, a deal that would be one of the largest telecoms buyouts of all time.
KKR already holds a 37.5 per cent stake in Telecom Italia’s “last mile” network but has moved to make a full offer for the entire company, according to three people with direct knowledge of the situation.
The offer for the Italian group, which is valued at €7.5bn and has net debt of €22.5bn, is the latest sign of private equity interest in the European telecoms sector. Funds are looking to break up businesses, separating the networks from the consumer businesses, to realise value or to improve the performance of the companies.
Telecom Italia, subject of a bitter tug of war for control four years ago between French investor Vivendi and US activist fund Elliott Management, has struggled in recent quarters and issued two profit warnings in the space of three months this year.
Its shares have declined by a quarter since June and almost two-thirds since 2018, piling pressure on Luigi Gubitosi, the Italian establishment figure appointed chief executive that year, to turn the company round. A board meeting had been planned for November 26 to discuss a potential management overhaul.
Vivendi denied it was in talks with KKR or CVC — as had been reported — or any other institution over a potential take-private from Telecom Italia. The French company is Telecom Italia’s largest shareholder with a 24 per cent stake followed by state lender Cassa Depositi e Prestiti, which owns almost 10 per cent.
“Vivendi is a long-term shareholder and we want to work with the government and other institutions to get Telecom Italia back on track,” the company said. “We’re not happy with the performance . . . The important thing is to stop this ship from going down.”
Telecom Italia was Europe’s most valuable telecoms company in the 1990s but has lurched from crisis to crisis over the past two decades. It is a politically important company and the government has a “golden power” to block takeovers or asset sales not deemed to be in the national interest.
The prime minister’s office, the Italian Treasury and Cassa Depositi e Prestiti declined to comment on whether Rome planned to exercise its veto powers on foreign takeovers of strategic assets.
Officials in Rome said the government would follow the developments closely and that it would not give up its oversight of assets it considers “strategic” such as Telecom Italia’s primary network and its Sparkle high-density cables.
According to several people in Rome, KKR would be willing to split the company in two and leave the controlling stake of Telecom Italia’s network to a state-controlled entity such as Cassa Depositi e Prestiti. Such a move would clash with other telecoms buyouts, including Macquarie’s takeover of TDC in Denmark, where funds have targeted ownership of valuable network assets when looking to split up telecoms businesses.
Rome is not opposed to such a project, but will be “looking at several options” over the next few weeks, the people said.
They said KKR had asked Telecom Italia for a response to its offer, which was first reported by Corriere della Sera, within four weeks.
KKR is one of the most active investors in European telecoms. It bought a minority stake in Telecom Italia’s secondary network for €1.8bn last year through its infrastructure arm and was part of a consortium of private equity groups that took Spanish telecoms operator MasMovil private in a €5bn deal last year. It bought Hyperoptic, a UK fibre company, in 2019.
The US buyout group previously approached Dutch telecoms provider KPN with a takeover offer, which was rejected this year.
Additional reporting by Sarah White in Paris and Emma Agyemang in London