By Mathieu Rosemain
PARIS (Reuters) – French telecoms group Iliad has offered more than 11 billion euros ($12.6 billion) to buy Vodafone’s Italian business, a source close to the matter said on Wednesday, as the firm founded by billionaire Xavier Niel seeks to grow overseas.
The price tag represents about seven times Vodafone Italia’s core operating profit, the source said, adding that Iliad is teaming up with a private equity firm for the bid.
The valuation is in the range of what some brokers, such as Banca Akros, said they expected Iliad to offer.
Paris-based Iliad has been reviewing options to further expand in Italy in recent months as it seeks to take advantage of deal fever in Italy’s telecoms industry to accelerate consolidation and cease a price war that has been slashing its margins, sources have said.
Iliad’s bid, first reported by the Financial Times, comes as incumbent Telecom Italia (TIM) is still assessing a 10.8 billion euros takeover approach from U.S. fund KKR aimed at taking Italy’s biggest phone group private.
KKR’s bid values TIM’s business at more than five times its core operating profits.
If successful, an Iliad-Vodafone Italia tie-up would create a telecoms powerhouse with a mobile market penetration of about 36%, above TIM.
Such a deal would transform the Italian telecoms landscape by cutting the number of major mobile operators from four to three. It would also face scrutiny from antitrust from regulators.
Iliad has secured financing from a top European bank, the source said. Vodafone’s board, which has received the offer, has not yet replied, the source added.
Reuters last month reported that Iliad and Vodafone were in talks to combine their respective businesses in Italy in an attempt to end cut-throat competition.
Vodafone and Iliad declined to comment.
($1 = 0.8749 euros)
(Reporting by Mathieu Rosemain; Additional reporting Aby Jose Koilparambil and Elvira Pollina; Editing by David Evans and Elaine Hardcastle)
