Home » Inside KKR’s €20 billion bid for Italy’s telco infrastructure

Inside KKR’s €20 billion bid for Italy’s telco infrastructure

The Italian telco’s board will convene in late February to discuss the US-based fund’s offer, which also encompasses Sparkle, the undersea cables operation. On its part, the Italian government is closely following this story, as it touches upon a nationally strategic asset

The 20 billion offer. US-based investment company KKR has tabled a non-binding agreement (rumoured to be valued at €16-21 billion) to acquire a controlling stake in critical infrastructure divisions of Italy’s biggest telecoms company, TIM.

  • KKR has set February 28 as the deadline, with an ensuing four-week due diligence window if the Italian company ends up accepting the offer.
  • TIM’s board will meet on February 24, according to a communiqué, to make a decision. Over the past hours, TIM’s stock soared nearly 10%.

Codeword: infrastructure. KKR’s offer is geared at acquiring a controlling stake in TIM’s network infrastructure, along with a part of Sparkle, a major TIM division operating in the field of international connectivity infrastructure – such as undersea internet cables.

  • The deal reportedly excludes the network backbone, which is a critical asset of national security importance, which is why the government will have the final say through its special powers.

The government’s take. “We have to see KKR’s proposal, what they are saying. Then the government, which is part shareholder and has other powers, will evaluate when it has full intelligence of the proposal,” said Economy Minister Giancarlo Giorgetti, adding that KKR has “rightly and correctly announced to us that they have forwarded their proposal with the markets closed. Now we can study the details.”

  • On his part, Business Minister Adolfo Urso noted that the government is “closely following” KKR’s offer, as it targets TIM, which “plays a crucial role in telephony services, in the realisation of broadband in our country and the infrastructure of the National Strategic Pole.”
  • Rome, he added, deems “the safeguarding of employment levels and the security of a strategic infrastructure such as the national telecommunications network ” to be crucial. “On these assumptions, developments concerning Italy’s leading telephony company will be assessed.”

Zooming out. This is the latest episode in a yearslong saga involving TIM, which is participated by State lender CDP and its landline network. KKR is one of the bidders, along with the Australian fund Macquarie, which might seek to outbid the former in the coming days.

  • The US company had already tried acquiring the entirety of TIM in November 2021, but the Italian telco’s board reportedly dragged its feet and ended up refusing the offer.

Watch out. CDP also controls Open Fiber, TIM’s biggest rival in the landline and fibre-optic space. And as Pietro Labriola, TIM’s CEO, indicated in July, Plan B entails merging with Open Fiber – thereby creating one national network infrastructure – or even “selling the entire network to a financial partner.”

  • Also, France-based conglomerate Vivendi owns nearly 24% of TIM, and it signalled multiple times the entire package is worth at least €31 billion.

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