(Bloomberg) — Telecom Italia SpA said it’s pushing ahead with an in-house plan to spin off its landline assets even as it pledged to hear out KKR & Co. on a preliminary offer to buy the troubled phone carrier.
The company’s board said in a statement late Sunday that it remains committed to its own asset reorganization plan, which hinges on an eventual merger with smaller state-backed rival Open Fiber SpA. According to the statement, the Italian company offers “untapped value” that needs to be taken into account before evaluating options other than its own management’s plan.
Still, the carrier said its board voted unanimously to allow Chief Executive Officer Pietro Labriola and Chairman Salvatore Rossi to proceed further in discussions with private equity giant KKR, according to the statement. That decision comes in the wake of pressure from some of the Italian company’s independent directors to move ahead with KKR, people familiar with the matter have said.
Telecom Italia shares rose as much as 9.7% in Milan on Monday morning, marking the biggest increase since November.
Telecom Italia said it would seek fresh information “to evaluate the attractiveness and concreteness” of KKR’s potential offer and then possibly agree on a timeframe for “an exclusive confirmatory due diligence.”
KKR in November made a preliminary bid of 50.5 euro cents a share for Telecom Italia, a premium of about 75% to Friday’s closing share price. Telecom Italia’s market value has fallen more than 25% since January to about 6.6 billion euros ($7.2 billion). The company reported a record 8.6 billion-euro loss in the last quarter of 2021 after booking impairment charges.
Sunday’s board decision essentially buys Telecom Italia more time to assess KKR’s offer. Labriola earlier this month unveiled his plan in a bid to counter KKR, focusing on extracting value by separating the company’s infrastructure unit from its commercial business.
That strategy could push Telecom Italia’s long-term value to as much as 1.3 euros per share if its landline assets are fully separated and then merged with Open Fiber, people familiar with the matter said last week.
In December KKR said its approach on Telecom Italia was “of a friendly nature,” and the U.S.-based company said it wanted to work with the carrier’s board “to achieve their support.”
Telecom Italia’s two biggest investors, France’s Vivendi SE and Italian state lender Cassa Depositi e Prestiti SpA, have repeatedly said the KKR bid doesn’t adequately reflect the company’s value.
(Updates with share reaction in fourth paragraph.)
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
