US financial investor KKR reaches for Telecom Italia

As of: 11/22/2021 11:18 a.m.

The US financial investor KKR is considering taking over the largest Italian telecommunications provider Telecom Italia (TIM). Without the approval of the Italian government, the deal will come to nothing.

The US financial investor KKR wants to take over the Italian telecommunications company TIM. The listed investment company officially announced its interest in buying. This was “not binding and indicative”, announced TIM, the former Telecom Italia, after an extraordinary board meeting. The TIM management emphasized that it was a “friendly” takeover offer.

KKR strives for the approval of the management and support of the board of directors. First of all, the fund wants to review the company for four weeks. During such a review, known as due diligence, the potential buyer analyzes the company not only on the business figures, but also on possible risks that could be in the balance sheet or in the legal situation. A new owner would also have to take on debts of 29 billion euros, for example.

Purchase price around eleven billion

A takeover would also have to be approved by the Italian state, which has the right to veto a “golden share”. The largest shareholder is the French media group Vivendi with a share of around 24 percent. According to the news agency Reuters, it is said from the Vivendi environment that the KKR offer does not reflect the value of TIM. Vivendi once paid EUR 1.071 per TIM share when they joined the company.

KKR aims to take over 100 percent of the shares in the former Italian monopoly and then to take the group off the stock exchange. The investor is offering EUR 0.505 per share, so Vivendi would make a loss if it got out. The TIM share was traded at EUR 0.35 on Friday. Measured against the price of the offer made in the room, Telecom Italia is valued at just under eleven billion.

The Italian group’s business has not been going as expected for a long time. Sales have shrunk by a fifth in the past five years. The fierce competition with rivals such as Iliad, Vodafone, Wind Tre and Fastweb is also responsible for this. The latest quarterly results were also disappointing. Even a deal with the streaming platform DAZN to broadcast Serie A soccer games this season did not bring the hoped-for growth in subscribers.

Does Italy’s government set conditions?

In Italy, the news of the KKR push, first reported by the Corriere della Sera newspaper, caused a stir. The government announced that it would follow developments. First of all, however, it is a good sign for the country if investors are interested in Italian companies, it said.

An assessment by the authorities is still expected. A law called “Golden Power” allows the Italian government, for example, to prevent deals by foreign investors in areas that are strategic for the state. The Ministry of Finance in Rome underlined in its reaction that broadband expansion must have priority, also in order to meet the requirements of the multi-billion euro reconstruction fund.

What do affiliates do?

KKR is best known in this country for its large stake in the Axel Springer media group, in which the holding company holds 35.6 percent of the shares. KKR is one of the world’s largest financial investors and is now listed on the stock exchange. The company is considered one of the pioneers in the industry, whose business model is to buy up mostly troubled companies, rebuild them and then sell them on at a profit.

It is precisely for this business model that financial investors such as KKR or Blackstone have been criticized for years as so-called locusts. They were accused of buying even healthy companies solely with the interest of short-term and exaggerated return expectations, of restructuring and dividing them without regard to jobs in order to sell the individual parts of the business at a profit.

Reckless demolition or sustainable renovation?

KKR itself discredited the industry when it took over and ruthlessly smashed US food giant Nabisco for $ 31 billion. Advocates, on the other hand, believe that companies like KKR are primarily to be seen as corporate savers who rehabilitate troubled companies with long-term interests so that jobs can be preserved and an important contribution to a healthy and efficient economy is made.

KKR now manages $ 429 billion worth of corporate equity investments, which equates to € 371 billion. In Germany, KKR has been involved in numerous companies over the years, such as MTU, Auto -teile-Unger (ATU), ProSieben and the Dual System Deutschland.

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