Telecom Italia ended up approving the firm offer for its fixed network submitted by the American investment fund KKR (AFP/Archives/Miguel MEDINA)
After months of suspense, Telecom Italia ended up approving on Sunday the firm offer for its fixed network submitted by the American investment fund KKR, associated with the Meloni government, for an amount of up to 22 billion euros.
The board of directors of the Italian operator, which delivered its verdict after a series of marathon meetings, openly defies its main shareholder, Vivendi, opposed to the sale of the network.
Vivendi immediately reacted, announcing its intention to “use all legal means at its disposal” to “contest” this “illegal” decision which, according to it, “tramples” on the rights of Telecom Italia shareholders.
The CEO of the Italian group, Pietro Labriola, welcomed a “great historic decision by the board of directors”. He assured that he remained “always open to dialogue” and to proposals submitted, “in particular by the largest shareholders”.
The transaction should allow the group “to reduce its financial debt by around 14 billion euros,” Telecom Italia said in a press release. Eleven directors voted in favor of the transfer, the other three having expressed a negative opinion.
The offer values the network at 18.8 billion euros, excluding Sparkle, a subsidiary specializing in submarine cables, and the total amount of the transaction can reach 22 billion euros, under certain conditions.
This proposal remains far from the expectations of Vivendi, the largest shareholder of Telecom Italia with a share of 23.75%, which was banking on 31 billion euros.
The board deemed KKR’s non-binding offer for Sparkle “unsatisfactory” and asked the fund to improve its proposal by December 5. From financial sources, the first offer amounted to some 600 million euros.
– Legal battle –
KKR has found a major ally, the Italian government, which intends to take a stake of up to 20% in the fixed network, to influence the choices of an infrastructure considered strategic.
If the project comes to fruition, despite the legal battle that is coming, Telecom Italia will become the first major operator in Europe to take the plunge and separate itself from its fixed network on its domestic market to reduce its heavy debt.
On several occasions, Vivendi had said it was ready to take legal action if KKR’s offer was approved without being submitted to an extraordinary general meeting of shareholders.
In such a meeting, decisions are taken by a two-thirds majority and Vivendi’s weight would be considerable. The French group slammed the door on the operator’s board of directors in January.
Vivendi had increased the pressure on Telecom Italia by asking it, in vain, to examine, before any decision, an alternative plan presented by Stefano Siragusa, former deputy general director of the operator.
To avoid selling the network, considered the “crown jewel” of the group, Mr. Siragusa, associated with the Merlyn investment fund, had proposed the sale of the lucrative Brazilian subsidiary and the branch in charge of individual customers in Italy.
– A heavy debt –
Telecom Italia needs new money to face a debt which continues to swell and now stands at 26.2 billion euros.
This debt prevents it from investing in the deployment of optical fiber, while Italy is far behind in this area.
According to the European Commission, fiber only covered 44% of households in Italy in 2022, compared to 63% in France and 89% in Spain.
Hence the decision of the Italian government, which has special powers (“golden power”) in sectors considered strategic, to increase its control over Telecom Italia.
The Italian State is already its second shareholder, through the 9.81% share held by the Italian Caisse des Dépôts (CDP).
KKR has committed to taking on around half of the operator’s approximately 40,000 employees in Italy, thus giving assurances to the government, keen to safeguard these jobs, according to a financial source.
A first attempt by KKR to take control of the entirety of Telecom Italia failed in April 2022, encountering, again, the refusal of Vivendi who considered its offer too low.
© 2023 AFP
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