March 29, 2022
By Elvira Pollina
MILAN (Reuters) -The board of Telecom Italia (TIM) on Tuesday was informed about a proposal from CVC for a stake in its enterprise services business and its directors were also briefed on discussions with KKR over a rival approach.
CVC has put a value of 6 billion euros ($6.6 billion) including debt on what would be a newly created TIM enterprise services business, a source close to the matter said on Tuesday.
The interest from CVC comes as TIM Chief Executive Pietro Labriola presses ahead with a plan to split TIM’s service business from its network operations as part of a broader strategy to revamp the debt-laden former phone monopoly.
U.S. fund KKR pitched a non-binding offer for TIM in November, valuing the whole of the group at 33 billion euros, when including net debt.
TIM left the New York-based fund waiting for nearly four months without an answer before agreeing earlier in March to engage in talks, while pressing ahead with its standalone reorganisation to unlock the group’s “untapped value”.
On Monday TIM said it remained in talks with KKR to assess the “attractiveness, actuality and deliverability” of its approach. Two people with knowledge of the matter said TIM had asked KKR to further clarify the terms of its bid by April 4.
Also on Monday, TIM said that CVC, in its expression of interest, proposed setting up an entity including connectivity operations for big corporate clients, cloud, cybersecurity and IoT services.
CVC’s evaluation of the business, included in the fund’s proposal, was first reported by Italian daily La Stampa.
Analysts’ valuation for the targeted business ranges widely between 5 and 10 billion euros. TIM and CVC both declined to comment.
The European private equity firm would be interested in taking a share of up to 49% in the business once it would be carved out, sources have previously said.
CVC, which is being advised by Barclays and Nomura, requested a 10 week exclusive period for negotiations, including eight weeks for due diligence, the same sources added.
Private equity firms are looking at whether there is value to be found in European telecoms companies as the telcos seek to improve fast services delivered over broadband.
One of the sticking point in negotiations remained KKR’s request for due diligence before formalising its bid, which the fund reiterated last week, two sources said.
In a letter sent to the U.S fund late on Monday, TIM asked KKR to clarify by Monday whether its due diligence would only have a confirmatory nature as requested by the phone group, the sources said.
TIM also asked whether the November price of 10.8 billion euros for the equity was confirmed, and sought details on the financing of the bid after KKR said it would not make extensive recourse to debt, the sources added.
One of the sources said that in reaffirming its interest for TIM, KKR had made a reference to recent market volatility which raised a question mark over whether the terms of its initial indicative proposal stood.($1 = 0.9098 euros)
(Additiona reporting by Gianluca Semeraro in Milan; Editing by Keith Weir, Valentina Za and Andrea Ricci)