KKR remains interested in taking over Telecom Italia (TIM) and also wants to discuss the phone group’s own plans to combine its fixed line assets with those of state-backed rival Open Fiber, two sources said on Thursday.
KKR submitted a non-binding 10.8 billion euro ($11.9 billion) takeover proposal for TIM in November, having already invested 1.8 billion euros for a 37.5% stake in the group’s last-mile fixed-line network last year.
Italy’s largest telecoms company left the New York-based fund waiting for nearly four months without an answer before TIM’s board agreed earlier in March to engage in talks.
TIM shares rose as much as 12% on Thursday to trade at just under 0.34 euros, as KKR remained in the game and other private equity firms circle with a view to investing in parts of its business under a break-up scenario for the company.
However, the stock remains well short of the 0.505 price per share at which the KKR proposal was pitched.
In a letter responding to questions from TIM on its offer, KKR stuck to a request to carry out a due diligence analysis before deciding on whether to proceed but has narrowed the scope of the information sought, the sources added.
KKR wrote it had “positive exchanges” with Italian authorities on its proposal, the people said.
While a merger of Open Fiber was not part of KKR’s plans for TIM, the fund wants to discuss with the company the antitrust implications of such a deal and how it can create value for the FiberCop business in which KKR is already an investor, the sources said.
Grappling with fierce competition in its domestic market, debt-laden TIM has been hit by multiple downgrades by major rating agencies this month after reporting a record annual loss and a weak outlook.
In a bid to revamp the beleaguered operator, newly-appointed Chief Executive Pietro Labriola has unveiled plans to split TIM’s service operations from its domestic fixed network operations to unlock value.
TIM’s largest shareholder Vivendi has slammed the KKR approach as too low and the French media group said there was “untapped value” in TIM.
A break-up of TIM could help revive a long-held project to merge TIM’s fixed line assets with those of Open Fiber, a move advocated by state lender CDP to avoid a duplication of heavy investment needed to upgrade the country’s network.
An Open Fiber merger could provide a 1 euro boost to TIM’s shares according to TIM’s internal calculations, sources familiar with the matter have said.
CDP owns a stake of nearly 10% in Telecom Italia and 60% in Open Fiber.