by Elvira Pollina and Giuseppe Fonte
MILAN (Reuters) – Italy’s Treasury may take full control of Telecom Italia’s (TIM) submarine cable division, Sparkle, as part of a deal with U.S. fund KKR to make a joint bid on the network of the group, according to a draft government decree.
In mid-August, the Italian government signed a memorandum of understanding with KKR, which is preparing a purchase offer for TIM. The fund wants to acquire NetCo, which brings together the fixed line network of the Italian group and the subsidiary Sparkle.
On Monday, Rome approved two decrees allowing the Treasury to take a 15% to 20% stake in NetCo. The executive orders, seen by Reuters, show the Treasury would also have the option of acquiring Sparkle “at a later stage”.
Sparkle manages fiber optic cables that span over 600,000 kilometers. The subsidiary was valued at 1.2 billion euros in KKR’s preliminary bid for NetCo, sources said.
The sale of the fixed network is a crucial element of the recovery plan of TIM, heavily indebted, initiated by its general manager Pietro Labriola.
The government’s initiative greatly increases the chances of a deal being finalized, “given the clear and pronounced political backing,” Equita analysts wrote in a note.
On the Milan Stock Exchange, Telecom Italia shares gained 0.25% at 1:05 p.m. GMT after taking up 3% earlier in the session.
KKR made an offer of some 23 billion euros, taking into account the debt situation and a number of variable elements and leaving the possibility for the government to join the offer to keep control over the assets.
TIM’s network is Italy’s main telecommunications infrastructure and Rome has been looking for years to ensure that investment is made to upgrade it by upgrading to fiber optics.
VIVENDI’S VERDICT EXPECTED
The decrees authorize the Treasury to submit a joint binding offer with KKR and other Italian investors for NetCo, which would give the government a minority stake valued at up to 2.2 billion euros.
A stumbling block to any deal remains the position of media group Vivendi, which has a roughly 24% stake in TIM. The French group has so far demanded a higher valuation for fixed network assets and questioned the strength of TIM’s remaining services business.
Senior Vivendi officials are waiting to be summoned to discuss the deal with Italian Prime Minister Giorgia Meloni’s top aides, although no meeting has been scheduled so far, sources familiar with the matter said. .
The executive orders provide rights for the Treasury in the governance of NetCo, allowing it to oversee decisions of strategic and national security importance, “including in the event of a change in the shareholding structure”.
(Blandine Hénault for the French version, edited by Kate Entringer)
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