© Reuters. FILE PHOTO: The Telecom Italia (TIM) logo is shown in this illustration taken on May 3, 2022. REUTERS/Dado Rovic
Written by Elvira Paulina and Akriti Sharma
MILAN (Reuters) – US fund KKR has consolidated its lead in the race to secure the land line network in Italy Telecom Italia (BIT:) (TIM) offered to raise its bid by up to or more than 2 billion euros ($2.2 billion), two people familiar with the matter said.
KKR’s bid could be worth more than €23 billion overall, widening the gap with a competing bid by a consortium that includes Italian state lender CDP and Australia’s Macquarie Fund.
The improved bid would still fall short of the more than €30 billion valuation of the network sought by TIM’s majority shareholder Vivendi (OTC:). But the best option for TIM CEO Pietro Labriola is to implement plans to rescue the debt-ridden company by selling the network.
Sources had previously told Reuters that both Labriola and some high-profile Italian officials had already seen KKR as the strongest bid ahead of Friday’s bid.
The company said late on Friday that it had received two new offers for its network, without elaborating. It has sought to improve offers for its most important assets after assessing that offers it received in May were not yet sufficient.
Labriola plans to focus TIM’s efforts on its ServCo services business and sell the NetCo unit that includes the domestic fixed access network and the international submarine cable unit Sparkle to reduce debt.
The total value of KKR’s offer hinges on the terms of the contracts linking ServCo to NetCo, the sources said, adding that the fund required four weeks to conduct due diligence to discuss such terms.
KKR declined to comment.
KKR was also offering to leave TIM a stake in NetCo, the source said, having previously indicated it would also welcome a government entity as a shareholder in the network, Italy’s main telecoms infrastructure.
Two other people close to the matter said CDP and Macquarie kept the economic value of their proposal little changed, suggesting a number of measures to address antitrust issues.
Antitrust issues are related to the fact that CDP and Macquarie also own wholesale fiber optic provider Open Fiber. One remedy could involve selling parts of Open Fiber.
CDP is also the second largest shareholder in TIM with a 10% stake.
TIM’s board meets to review the proposals on June 19 and is expected to make a decision on June 22.
($1 = 0.9305 euros)