(Bloomberg) — Italy’s state lender kicked off a bidding war with US-based KKR & Co Inc., launching a counterbid for Telecom Italia SpA’s €20 billion ($21.3 billion) landline network.
The lender, Cassa Depositi e Prestiti SpA, said on Sunday that it was teaming up with Australian infrastructure fund Macquarie Group Ltd on a bid for the network, countering an offer last month from investment firm KKR. Telecom Italia, which has been weighing a plan for a network spinoff for years, has requested that KKR improve that offer.
Telecom Italia shares rose as much as 6.3% in Milan on Monday, giving the company a market value of about €6.8 billion.
Both bids value the Telecom Italia grid in a range of €18 billion to €20 billion including debt and some performance-based “earnout,” according to people familiar with the matter. Telecom Italia’s biggest shareholder, France’s Vivendi SE, has repeatedly said it sets a valuation of around €30 billion on the grid.
The dual offers to buy and spin off the network, which would be a first for a European carrier, come after talks to cobble together a joint bid by Cassa Depositi and KKR collapsed. KKR already owns a minority stake in Telecom Italia’s FiberCop unit.
Sunday’s announcement marks the latest twist in a saga that dates back almost two decades. The first plan aimed at extracting value from the grid through a spinoff was drawn up in 2006 by advisers to then-Prime Minister Romano Prodi.
Grid separation has been a topic for debate in Italian industry and political circles ever since, with details and deal outlines shifting constantly. Discussions heated up notably in 2013 when the company was led by Chief Executive Officer Franco Bernabe, but the carrier never got to the point of receiving actual offers for the asset.
Support from the Rome-based government is seen as crucial for any potential investor in Telecom Italia, a former monopoly that’s under pressure to slash debt. State-controlled Cassa Depositi, also known as CDP, owns almost 10% of Telecom Italia and has a majority stake in smaller rival Open Fiber SpA.
Prime Minister Giorgia Meloni has signaled that she considers Telecom Italia’s network a strategic asset that must retain a degree of public oversight. Italy’s government has the right to veto deals involving assets deemed to be of strategic value, and Rome’s desire to safeguard the 40,000 jobs at the company means any offer without state backing would face significant hurdles.
The CDP-Macquarie offer meshes with the government’s goal of building a single national network through a merger of Telecom Italia and Open Fiber, and promises to preserve a strategic asset and accelerate the country’s digitalization, the people said.
Telecom Italia Chief Executive Officer Pietro Labriola sees a network sale as the best way to slash the company’s debt and enable the carrier to continue as a viable standalone business. Telecom Italia in 2021 rejected an offer from KKR to purchase its full business for €10.8 billion.
The newest offer will be subject to the preliminary examination by Telecom Italia’s “related parties committee” and may be reviewed at a board meeting March 15 or at another date to be defined, the carrier said in a statement. Both offers expire at the end of March.
(Updates with counterbid in first paragraph.)
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