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This non-binding proposal valued the former telephone monopoly at 0.505 euros per share in cash, a 45.7% premium to Friday’s closing price, and rose to more than 33 billion euros including debt.
The total debt reported by Telecom Italia exceeds 29 billion euros, and Standard & Poor’s last week further downgraded the company’s credit rating to below investment grade. According to reports, the total value of the tender offer including debt is close to 33 billion euros.
Telecom Italia CEO Luigi Gubitosi has been facing pressure from top investor Vivendi after issuing two profit warnings in a single quarter.
The French media giant has long had a dispute with the American radical hedge fund Elliott Management, which led to the resignation of Gubitosi’s predecessor, Amos Genish, in November 2018.
Before trading started on Monday, the troubled phone company’s stock price had fallen nearly 50% in the past five years.
The Italian Ministry of Finance stated that foreign interest in Italian companies is “good news for the country.”
According to a statement issued on Monday, the board of Telecom Italia, chaired by former Bank of Italy deputy governor Salvatore Rossi, met on Sunday to discuss the proposal. KKR described the proposal as “friendly.”
The statement added: “At present, among other things, a confirmatory due diligence of about 4 weeks is required, as well as the approval of major government stakeholders.”
Deutsche Bank also stated on Monday that the news is “positive for TI and the industry as a whole”.
Telecommunications stock analyst Keval Khiroya said: “This also shows TI’s reliance on strategic actions, which may be easier to obtain in private hands.”
Victoria Scholar, head of investment at Interactive Investor, an online stockbroker in the United Kingdom, said that the offer “marks a broader appeal to the well-funded US private equity in the European telecommunications industry” and may help reverse the recent fate of Telecom Italia.