(Updated with latest stock movements, date change from ROME)
Shares of Telecom Italia (TIM) TLIT.MI failed to hold on to early gains on Monday, reversing course after the telco’s board approved the sale of its landline network to the American private equity firm KKR KKR.MI.
The 19 billion euro ($20.4 billion) deal is a key part of TIM Chief Executive Pietro Labriola’s plan to revive the debt-ridden former telephone monopoly. This plan is supported by the Italian government but has sparked disagreement from main shareholder Vivendi
VIV.PA.
Shares initially opened up 4.4%, but trading was repeatedly halted due to excessive volatility. They were down about 4% at 0859 GMT.
TIM has long been looking for a transformation deal that would reshape a company hobbled by debt. KKR’s deal would make it the first telecommunications group in a major European country to divest itself of its landline network.
However, opposition from French media group Vivendi, which owns 24% of TIM, cast a shadow over the operation.
Vivendi said late Sunday that it considered the decision to proceed without a shareholder vote to be “illegal” and that it would use “all legal means at its disposal to contest” this decision.
Analysts at Equita, who have a buy rating on TIM, said they expected the deal to continue.
“We believe the chances of blocking the transaction at this stage are limited,” they said in a note.
(1 dollar = 0.9306 euros)