The Italian government agreed with US private equity firm KKR & Co. to take a stake of up to 20% in Telecom Italia SpA’s network business as Prime Minister Giorgia Meloni asserts greater state oversight of strategic assets.
(Bloomberg) — The Italian government agreed with US private equity firm KKR & Co. to take a stake of up to 20% in Telecom Italia SpA’s network business as Prime Minister Giorgia Meloni asserts greater state oversight of strategic assets.
The U.S. private equity firm signed a preliminary deal to include the government in its €23 billion ($25.3 billion) bid for the former phone monopoly’s network, the finance ministry said a statement late Thursday. A decree will complete the process.
The announcement — Meloni’s second surprise intervention in a week after she imposed a windfall tax on banks — was seen as a positive news by Telecom Italia’s largest shareholder, Vivendi SE, who had earlier opposed the sale.
The opening of a serious dialog with Vivendi is necessary to reach a feasible solution, according to people close to the French media-conglomerate. For Vivendi, a discussion is now essential to find the best possible outcome, the people added. The French media conglomerate has valued the network at about €30 billion.
The government’s “direct and active” intervention makes explicit “the strong and broad political support for the transaction,” Alberto Gegra, an analyst at Equita, wrote in a note to clients.
Telecom Italia shares rose as much as 5.6% in Milan trading to their highest since April, boosting the company’s market value to €6.2 billion.
Meloni has signaled that she considers Telecom Italia’s network a strategic asset that must retain a degree of public oversight. The government has the right to veto deals involving such assets, and Rome’s desire to safeguard the company’s 40,000 employees means that any offer without state backing would face significant hurdles.
The deal with KKR will provide “a decisive role for the government in defining strategic choices,” the economy ministry said in its statement.
KKR is also adding infrastructure fund F2i SGR SpA to its bidding group, boosting the numbers of Italian investors in the consortium.
Telecom Italia put its network business up for sale earlier this year in an effort to reduce its gross debt of more than €30 billion. The business has been grappling with a complex mix of high labor costs and the need for ever-growing investments to modernize its network infrastructure.
–With assistance from Antonio Vanuzzo and Chiara Remondini.
(Updates with Vivendi’s position from third graph)
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