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KKR launches buyout valuing Telecom Italia at €33bn, CVC and Advent remain open to options

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Global buyout giant KKR has launched a €10.8bn buyout proposal for Italy’s largest phone company Telecom Italia, Reuters reported. Together with the net debt of €22.5bn, the deal would value the company at an enterprise value of €33bn.

The non-binding proposal values the company at €0.505 per share in cash, which represented a 45.7% premium on Friday’s closing price.  TIM’s shares rose as much as 30% after the news.

TIM reportedly said that the KKR offer was “friendly” but did not give a view on the proposal. Whether it will go through will also depend on the government’s backing and the outcome of a four-week due diligence analysis.

TIM’s top investor French media group Vivendi, which holds 24% stake in TIM at a acquisition price of €1.07 per share, has told Reuters that it did not believe the buyout firm’s offer adequately valued TIM.

Having issued two profits warnings in three months, TIM CEO Luigi Gubitosi had suggested earlier in the month to carve out assets and attract new investors for parts of TIM’s portfolio, including the most prized fixed line network which the government deemed strategic.

KKR had already bought 37.5% stake in TIM unit FiberCop for €1.8bn last year. FiberCop holds TIM’s “last mile” network running from the street to peoples homes.

Sources said KKR would like to take TIM private and to run its fixed-line assets as a government-regulated asset along the model of power grid Terna or gas grid Snam.

Rival private equity firms CVC and Advent are also looking into the possibility of a TIM buyout and had said they remain open to working on a solution to strengthen TIM.

KKR is no new player in the telecom field.

The firm had agreed a roughly $1bn buyout of a majority stake in  Telefónica‘s Chilean fibre optic network in February.

It made the investment through its Global Infrastructure Investors III Fund, which it closed on $7.4bn three years ago.

AltAssets revealed last year that KKR had sealed a powerful return on its investment in Deutsche Glasfaser after agreeing a €2.8bn sale of the business, scoring a 47 per cent IRR.

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