KKR’s €22.5bn Telecom Italia offer gets tested

One thing to start: International accounting firm Deloitte has resigned as auditor to Byju’s, India’s most highly valued start-up, saying the education technology company had failed to hand over any financial results for the 2021-22 business year. More here.

In today’s newsletter:

• Vivendi challenges KKR’s Telecom Italia offer

• Rocket Internet’s big dividend

• GIC eyes private deals in US 

KKR and Vivendi dig in on Telecom Italia assets

If you were tempted to think Vivendi, the French media group controlled by billionaire Vincent Bolloré, might back down in the latest round of its fight with Telecom Italia (TIM) over the future of its prized landline network, think again.

As the Italian mobile and broadband group made its exclusive talks with US private equity fund KKR official on Thursday, its top shareholder Vivendi is digging in to fight the sale, people with knowledge of the situation told the FT’s Adrienne Klasa and Silvia Sciorilli Borrelli.

Vivendi, which holds a 23.75 per cent stake in TIM and more than 17 per cent of its voting rights, believes the private equity group’s offer undervalues the network and that any sale would be a strategic mistake.

“Separating the network without solving the problem of what’s next for Telecom Italia is just procrastination . . . and deficient governance and management,” said one of the people.

Vivendi has “been fighting this battle because the asset that is the jewel of the company is the network. So if you separate the network from the rest of the company it’s a dead man walking,” the person added.

While KKR’s offer values the network at about €22.5bn, Vivendi argues it’s worth more than €30bn.

The French group has invested more than €4bn building its stake in TIM since 2015, billing it initially as a strategy to create a media champion in southern Europe.

However, it has had to write down its investment twice as the Italian company’s valuation plunged amid high debt, increased domestic competition, lower margins and multiple management overhauls.

TIM’s board said it aimed to have a binding offer for a sale of the network to KKR in hand by the end of September.

Italian authorities, meanwhile, appear to be losing patience with Vivendi. Some officials said the French group’s “tacitly obstructive opposition” to the deal had “profoundly” irritated Rome, which didn’t believe Vivendi had a viable alternative solution.

“It’s either this or a capital increase. It’s understandable they don’t want to lose money on their investment, but this behaviour is rather childish because the alternatives to KKR — CDP and Macquarie — don’t look very good at all,” said a senior Italian official, referring to two other bidders which value the network at under €20bn.

Rocket Internet becomes a cash cow for its founder

When DD last checked in on Oliver Samwer, the boss of German technology investor Rocket Internet, he was dramatically slowing down new deals and slashing costs — a sharp contrast to his earlier aggressive tactics.

But while Samwer may be backing down on fresh investments, he is stepping up in other areas.

Samwer is poised to receive a €260mn annual dividend after an annual general meeting on Thursday, DD’s Ivan Levingston revealed. That payment, via a vehicle through which his family controls Rocket, marks a massive increase from prior years and comes after Samwer tightened his grip over the group.

It also underscores the ways in which he is shifting the business away from its roots as one of Europe’s most prolific start-up financiers, towards a more conservative investment house focused on generating profits.

So while Rocket has closed one of its investment units, abandoned plans to raise a new start-up fund, and urged certain companies to adopt more conservative spending plans, the focus now appears to be turning towards generating cash for its owners.

“The general theme is to get as much liquidity out,” said one person familiar with the company.

The increased dividend also comes after Samwer increased his control when the company bought out a large stake held by activist investor Elliott Management. This has left Samwer’s vehicle with about 83 per cent ownership of Rocket Internet.

GIC hunts for private assets in the US

Singapore’s sovereign wealth fund GIC is focusing its dealmaking bets on the US, a decision that will be music to the ears of many of the world’s largest private equity and venture capital firms. 

GIC, whose assets are estimated by analysts to exceed $700bn, has told private equity and venture capital executives this year that it wants to increase exposure to US-focused funds, people familiar with the investor’s thinking told the FT.

“We cannot suggest opportunities fast enough,” said a partner at one global venture fund with a San Francisco office. “They are eager for what we have from San Francisco to Orlando.”

The focus on the US by one of Asia’s biggest sovereign wealth funds reflects optimism in the resilience of the country’s top technology companies despite last year’s heavy sell-off. The US is also a prime hunting ground for artificial intelligence companies as the industry expands.

It comes as the fund seeks growth outside of China and at a moment of collapsing funding and falling valuations for private start-ups in the US. 

GIC struck 63 deals involving US-based private companies including in technology, healthcare and property in 2022 and 2021, compared with 39 in 2019 and 2018, according to data by Refinitiv.

GIC also appears to be on a hiring push. It is advertising 18 jobs in the US, according to posts on LinkedIn. One ad is for a specialist in the private equity secondary market as well as other senior roles in equities, fixed-income and portfolio management.

GIG has been a major direct investor in prominent recent deals such as the leveraged buyouts of Zendesk and McAfee as well as Blackstone’s carve out of Emerson’s climate business.

Job moves

• TikTok chief operating officer Vanessa Pappas is stepping down. Zenia Mucha, a former Walt Disney executive, is joining as chief brand and communications officer.

• Goldman Sachs’ technology investment banking co-head Tammy Kiely is leaving the bank for boutique Evercore Partners, according to Bloomberg.

• L Catterton, a consumer-focused investment firm, has hired Peter Chang as managing partner and co-head of private credit. He joins from Oaktree Capital Management.

• Citi has named Reto Faber as head of securities services for Europe, the Middle East and Africa. 

Smart reads

Barbarians at the bookshop US private equity group KKR is among the bidders for book publisher Simon & Schuster, which was put up for sale after US regulators blocked a merger with rival company Penguin Random House. But is private equity a good owner for the asset, the FT asks.

Disney loses its magic After a string of box office megahits, some of Disney studio’s latest offerings have performed comparatively poorly. Can the company behind the Marvel franchise get its magic back, the FT reports. 

Bankers lose out For decades, investment bankers have been the envy of Wall Street, pulling in large salaries and bonuses. Now, corporate lawyers’ pay packets have surpassed them and a deal drought is prompting some top tech bankers to leave large firms such as Goldman Sachs for smaller peers. 

News round-up

Fortress Investment Group set to acquire Vice out of bankruptcy (New York Times)

Ocado shares surge over Amazon bid speculation (FT)

Microsoft paints Sony as ‘complainer-in-chief’ against $75bn Activision deal (FT)

MSC said to enter exclusive talks to buy Italo train operator (Bloomberg)

German chemical group Covestro rejects €13bn Abu Dhabi approach (FT)