(Bloomberg) — Telecom Italia shares tumbled as KKR & Co. plans to drop a 10.8 billion-euro ($11.9 billion) takeover proposal if the ex-phone monopoly doesn’t grant it the due diligence it’s requested since last November.
In a letter expected on Monday, KKR is set to reiterate its interest in making a possible bid while making clear it wants to review the phone carrier’s finances even more urgently than before, as market conditions have changed, according to people familiar with the matter.
Telecom Italia shares fell as much as 7.4% in Milan on Monday to just below 0.30 euros, cutting the company’s market value to around 6.3 billion euros.
Russia’s invasion of Ukraine and recent downgrades to Telecom Italia’s credit rating are among the reasons for the request, the people said, asking not to be identified because the matter isn’t public.
Spokespeople for KKR and Telecom Italia declined to comment.
Single Network
Telecom Italia Chief Executive Officer Pietro Labriola is working on a plan that rivals KKR’s full takeover plan.
Under that plan, landline assets would be merged with those of smaller, state-backed rival Open Fiber SpA, aligning Telecom Italia with a government goal of building a single national fiber network while avoiding duplicate investments.
The process could take several months and would need approval from European regulators, people familiar with the matter said in March.
Under the plan, state lender Cassa Depositi e Prestiti SpA, Telecom Italia’s second-largest investor, would get a majority stake in the company’s fixed network assets, people familiar with the matter said earlier this year.
CDP is also the controlling shareholder of Open Fiber.
On Saturday, Telecom Italia confirmed in a statement that it signed a non-disclosure agreement with CDP to start preliminary discussions on integrating its network with that of Open Fiber.
This deal is also open to KKR and other funds, two other people familiar with the matter said.
Labriola also has a project to separate all Telecom Italia’s commercial services into another unit called ServCo, according to Telecom Italia’s business plan.
Last month, CVC Capital Partners made a non-binding offer for 49% of Telecom Italia’s new enterprise services unit.
Telecom Italia plans to discuss CVC’s non-binding bid at a board meeting scheduled for April 7 after the company’s annual general meeting, the people said.
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