Monday 22 November 2021
Billions for restructuring cases
US investor reaches for Italy’s telecom giant
Italy’s ex-telephone monopoly is barely competitive, heavily indebted and, even according to the government, has too many employees. The US financial investor KKR is still ready to pay a lot of money for Telecom Italia.
The US financial investor KKR is considering the takeover of Telecom Italia (TIM) for around 10.8 billion euros. The largest telephone provider in Italy announced that KKR had submitted a non-binding offer of EUR 0.505 per share. That corresponds to a high premium of almost 46 percent on the closing price of the ordinary shares on Friday. KKR is considering taking TIM off the stock exchange afterwards. The Italian state, which has the right to veto a so-called golden share, would also have to agree to a takeover.
The business model of financial investors like KKR usually consists of buying unprofitable companies and increasing their value by cutting costs, for example by cutting jobs or selling parts of the company, in order to then sell them at a profit. Financial investors are often criticized because of the often tough restructuring measures taken at companies that have been taken over.
Telecom Italia left open how it feels about the advance. After a meeting of the board of directors it was only said that KKR wanted to see its project as “friendly” and win the support of the TIM management. The Italian group’s business has been bad for a long time. Sales have shrunk by a fifth in the past five years. The fierce competition with rivals such as Iliad, Vodafone, Wind Tre and Fastweb is also responsible for this.
29 billion euros in debt
Under TIM boss Luigi Gubitosi there were two profit warnings within three months. Since then, the manager has been in the sights of TIM’s largest shareholder, the French Vivendi group. From their environment it was said that the KKR offer did not reflect the value of TIM. Vivendi once paid 1.071 euros per TIM share when they joined the company. A new owner would also have to take over TIM’s debts of 29 billion euros.
Gubitosi brought KKR on board in 2020. At that time, the US investor had paid 1.8 billion euros for 37.5 percent in the company Fibercop, in which TIM’s business with the “last mile” of the networks from the distribution boxes in the streets to the households is bundled. The government is interested in the rapid expansion of the broadband network in Italy. Billions in investments are required for this. The current copper network has to be converted to fiber optic so that the data transmission rates required by the industry are possible.
The government left it open on Sunday evening as to its position on KKR’s plans. Watch the development, iess it. The government’s goal is to ensure that any takeover is compatible with broadband expansion. It will also be seen whether the KKR proposal fits in with the government’s goal of creating jobs at TIM. The group currently employs around 42,500 people in Italy. The government can prohibit a takeover if it considers a company to be strategically important.