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Italy’s state lender rejects KKR’s Telecom Italia grid bid


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Telecom Italia SpA’s long-discussed plan to reduce a €20 billion ($21 billion) debt pile by selling off its most profitable asset, the landline network, now appears feasible, with two multibillion-euro bids on the table.

Cassa Depositi e Prestiti SpA, Italy’s state lender, announced on Sunday that it was collaborating with Australian infrastructure fund Macquarie Group Ltd on a bid for the network, in response to an offer made last month by US investment firm KKR & Co. Telecom Italia’s board of directors has requested that KKR improve its offer.

Both bids place the Telecom Italia grid in the €18 billion to €20 billion range, including debt and some performance-based payments “earnout,” according to sources familiar with the situation.

Vivendi SE, France’s largest shareholder in Telecom Italia, has stated repeatedly that the grid is valued at around €30 billion.

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The dual offers to buy and spin off the network, which would be a first for a European carrier, come after talks between Cassa Depositi and KKR fell through. KKR already has a stake in Telecom Italia’s FiberCop division.

The announcement on Sunday is the latest twist in a nearly two-decade-long saga. The first plan to extract value from the grid through a spinoff was devised in 2006 by then-Prime Minister Romano Prodi’s advisers.

Since then, grid separation has been a source of contention in Italian industry and politics, with details and deal outlines constantly shifting. Discussions heated up significantly in 2013, when the company was led by Chief Executive Officer Franco Bernabe, but the carrier never received actual bids for the asset.

The State’s Role

The government’s backing is seen as critical for any potential investor in Telecom Italia, a former monopoly under pressure to reduce debt.

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Cassa Depositi, also known as CDP, is a state-controlled company that owns nearly 10% of Telecom Italia and a majority stake in smaller rival Open Fiber SpA.

Prime Minister Giorgia Meloni has indicated that she views Telecom Italia’s network as a strategic asset that requires public oversight. The Italian government has the authority to veto deals involving strategic assets, and Rome’s desire to protect the company’s 40,000 jobs means that any offer without state backing would face significant obstacles.

According to the people, the CDP-Macquarie offer aligns with the government’s goal of creating a single national network through the merger of Telecom Italia and Open Fiber, and it promises to preserve a strategic asset while also accelerating the country’s digitalization.

Telecom Italia CEO Pietro Labriola believes that selling the company’s network is the best way to reduce debt and allow the carrier to continue as a viable standalone business. In 2021, Telecom Italia rejected a €10.8 billion offer from KKR to buy its entire business.

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Telecom Italia’s preliminary review of the latest offer will take place “related parties committee” and may be reviewed at a board meeting on March 15 or another date to be determined, according to a statement from the carrier. Both offers are set to expire at the end of March.

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