US investment firm KKR has moved to acquire Telecom Italia (TIM) for $37.5 billion (€33.2 billion), including debt.
The “non-binding and indicative” offer, with a chance of becoming one of the largest private equity buyouts in Europe, was discusssed by the TIM board on Sunday, November 21.
If a bid for Italy's incumbent telco proves successful, the firm will go private and be de-listed from the Borsa Italiana (Italian Stock Exchange).
In communications and services terms, the potential deal is massive. As well as serving both businesses and consumers with broadband and mobile services, Telecom Italia also serves as an IT services provider to enterprises and the Italian government. It also owns the Sparkle international telecoms and data centre inter-connectivity network.
Any deal is expected to attract the close regulatory attention of the Italian government and perhaps the European Commission, as the firm's networks and data centres are highly inter-connected with other countries. The security of Italian government data is an issue that will also be considered.
KKR has offered €0.505 a share in cash, which represents a 45.7% premium on the company’s closing share price on Friday, November 19. This values TIM’s equity at €10.8 billion, with the rest of the proposed cash outlay taken up by the firm's massive €22.5 billion debt.
“The Indication of Interest was qualified by KKR as 'friendly' and aims at obtaining approval from TIM’s directors and support from the company’s management,” said TIM's board, in a statement to shareholders.
It went on: “For the time being, it is conditional, with an estimated four-week confirmatory due diligence period, including clearance by key government stakeholders.”
KKR has acted after TIM posted two profit warnings in the space of three months. The private equity firm already has a minority stake in a TIM unit delivering broadband to premises.
KKR clearly has deep pockets, as it recently partnered with Global Infrastructure Partners to acquire data centre operator CyrusOne for $15 billion.
