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Telecom Italia is due to hold an emergency board meeting on Sunday to assess an offer to take over US private equity group KKR, a deal that would be one of the biggest telecom buyouts of all time.
KKR already has a 37.5% stake in Telecom Italia’s “last mile” network, but has decided to make a full company-wide offer, according to three people with direct knowledge of the situation.
The Italian group’s offer, valued at 7.5 billion euros and with a gross debt of 29 billion euros, is the latest sign of private equity interest in the European telecoms sector. The funds seek to dismantle businesses, separate networks from mainstream businesses, realize value or improve business performance.
Telecom Italia, which was the subject of a bitter struggle for control four years ago between French investor Vivendi and American activist fund Elliott Management, has struggled in recent quarters and issued two profit warnings Last year.
Shares have fallen by a third since March and two-thirds since 2018, putting pressure on Luigi Gubitosi, the Italian establishment figure who was appointed chief executive in 2018, to turn the company around.
News of the candidacy was first reported by Corriere della Sera.
Vivendi has denied that it is in talks with KKR or CVC – as had been reported – or any other institution over a possible takeover by Telecom Italia.
“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 are not satisfied with the performance. . . The important thing is to prevent this ship from sinking.
Telecom Italia was Europe’s largest telecommunications company in the 1990s, but has gone from crisis to crisis over the past two decades. It is a politically important undertaking and the government has “golden power” to block takeovers or sales of assets that are not considered to be in the national interest.
KKR is one of the most active investors in European telecoms. It bought a minority stake in Telecom Italia’s secondary network last year for 1.8 billion euros, through its infrastructure arm, and was part of a consortium of private equity groups that privatized the operator. Spanish telecommunications company MasMovil in a 5 billion euro deal last year. It acquired Hyperoptic, a UK integral fiber production company, in 2019.
The US buyout group previously approached Dutch telecommunications provider KPN with a takeover offer, which was rejected this year alongside a separate approach from EQT and Stonepeak Infrastructure Partners. Either transaction would have been one of the largest private equity takeover attempts in European history.
Additional reporting by Sarah White in Paris
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