Telecom Italia (or TIM) has received an offer of 10.8 billion euros (equivalent to 12 billion dollars) from the US investment fund KKR with the aim of acquiring the largest telecommunications group in Italy, the deal comes as TIM CEO Luigi Gubitosi struggles to stay in place after coming under fire from his biggest investor, Vivendi Group, after two profit warnings in three months.
Telecom Italia reported that KKR has set a share price of €0.505 for the potential acquisition, which is 45.7% higher than the closing price of TIM’s ordinary shares on Friday, noting that any new owner of the Italian telecom company will also bear its total debts amounting to 29 billion euros.
The Italian government will closely follow the developments of the deal and will focus on Telecom Italia’s plans to dispose of its fixed or landline assets, which will be key to whether the government will use its veto, as Rome has special powers to reject takeover deals to protect strategically important companies from foreign bids.
Sources close to Vivendi, which is trying to replace Gobitossi, said the French media group believes that KKR’s bid does not give Telecom Italia a proper rating.
It is worth noting that Telecom Italia’s revenues have shrunk by about a fifth over the past five years after a strong blow from its local competitors such as Iliad, Vodafone, Wind Tre and FastWeb.