Charles J. Laurent
Vivendi, the top shareholder of Telecom Italia, has vowed to "use any legal means at its disposal" to block the sale of the Italian phone company's fixed infrastructure assets to U.S. private equity firm Kohlberg Kravis Roberts & Co (KKR) for a price nearing $24 billion.
In a statement, Vivendi expressed its opposition to Telecom Italia's decision to accept KKR's offer, deeming it "unlawful." The French media company, renowned for its ownership of video sharing platform Dailymotion and film company Groupe Canal+, had previously raised concerns about both the offered price and the future viability of the remaining business.
Vivendi argues that any approval of the deal should have been subject to a shareholder vote. The company asserts that the Telecom Italia board violated corporate governance rules, asserting that "shareholders' rights have been trampled on." Vivendi, supported by French billionaire Vincent Bolloré, has insisted that Telecom Italia's fixed infrastructure assets should be valued at €30 billion.
Telecom Italia's board, in contrast, approved KKR's offer to take control of its fixed infrastructure business known as NetCo and its fiber optics services divisions in a deal worth up to €22 billion (~$23.7 billion). However, the board rejected KKR's bid to acquire telecom company Sparkle, urging the fund to offer a higher price. The sale is expected to be finalized by summer 2024.
The sale of Telecom Italia's assets is a crucial part of CEO Pietro Labriola's strategy to alleviate the company's staggering €26 billion debt, which has become increasingly burdensome due to rising interest rates.
The Italian government, led by Prime Minister Giorgia Meloni, has expressed its support for a deal that aims to replace the country's outdated copper telecoms networks with high-speed fiber optics infrastructure. This move is in line with the targets set by the European Union.
KKR's involvement in the deal would bring about a significant transformation for Telecom Italia. The company would shift its focus to selling phone services in both Italy and Brazil. This strategic change aims to streamline its operations and enhance its market presence.
Merlyn Advisors, a London-based investment firm that owns a 3% stake in Telecom Italia, has proposed an alternative debt reduction plan. Under this plan, the Italian company would retain its fixed infrastructure assets while divesting its domestic retail segment and Brazilian subsidiary.
Vivendi, in a letter dated November 1, has called on Telecom Italia to seriously consider Merlyn Advisor's alternative debt-reduction plans. This call for consideration reinforces Vivendi's stance against KKR's deal and highlights its preference for Merlyn Advisor's proposal.
Telecom Italia's shares experienced a 4% decline on Monday, despite a 4% increase over the past year. This drop in share price comes amid continued conflict between Vivendi, a French media company, and the board of Telecom Italia. The conflicts between the two entities resulted in the departure of Telecom Italia's former CEO, Flavio Cattaneo, in July 2017.
Deutsche Bank, led by Robert Grindle, has noted a report from Italian financial newspaper Il Sole stating that Vivendi may consider selling its stake in Telecom Italia for €0.5 per share. Currently, Telecom Italia's shares are trading at €0.25 per share. Analysts suggest that Vivendi's opposition to the deal may be a strategic move to create pressure for another buyer to acquire its stake.
In conclusion, the support of the Italian government, along with the ongoing discussions between different stakeholders, adds an intriguing dimension to the future of Telecom Italia's operations and ownership.
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