Deal: KKR Makes $37B Buyout Offer For Telecom Italia

  • General
  • November 23, 2021
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  • 6 minutes read
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Private equity giant KKR (NYSE: KKR) has ventured into Italy for its latest buyout deal. The firm has offered to buy Telecom Italia (BIT: TIT), the largest telecom provider in Italy, in a deal worth €33bn ($37bn), including debt.

  • KKR offered 0.505 Euros in cash for each outstanding Telecom Italia share, a 46% premium to the last closing share price before the offer. That sums up to €10.7bn ($12bn) in cash to be paid for Telecom Italia, and including the telecom firm’s large net debt of €22.5bn ($25bn) sums up to $37bn in total. 
  • KKR’s offer is non-binding and must be approved by Telecom Italia’s board members and majority shareholders before the deal goes through. Approval must also come from the Italian government, which was veto power over the takeover of the formerly state-owned telecoms firm. 
  • Telecom Italia gave no indication that it’ll approve the deal. If approval is given, it’ll mark one of the biggest buyout deals of a European company by an American counterpart.
KKR buying Telecom Italia won’t be an easy hill to climb. The private equity firm could face fierce opposition from Vivendi, the French conglomerate that owns 24% of Telecom Italia’s shares. In a statement to Bloomberg, a Vivendi spokesperson billed KKR’s offer as too low but said it’s not entirely opposing the PE firm’s bidding. 

KKR is the latest twist in Telecom Italia’s history that involves an American firm. In 2019, the telecoms firm was the subject of a fierce battle for control between Vivendi and Elliott Management, an American activist hedge fund.
  • Telecom Italia has struggled in recent years; its shares have declined almost two-thirds since 2018. In fact, Vivendi paid an average of €1 for its Telecom Italia shares and now sees KKR offering half of that for its takeover; you can understand Vivendi’s rationale of terming the offer too low. 
  • Notably, KKR tried to buy another European telecoms provider, the Netherlands-based KPN, this year but got rebuffed. They say once bitten, twice shy, so we think KKR gathered much courage to make an offer for Telecom Italia and would press for it to go through. 
With over $400bn of assets under management and the ability to tap massive debt funding for its deals, we can expect regular billion-dollar deals from KKR each year. Just a week ago, the same PE firm teamed up with another investor to buy CyrusOne, a data center operator, for $15bn. 

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