By Elvira Pollina
MILAN (Reuters) -Uncertainty over the prospects for a multibillion euro approach filed by U.S. fund KKR for Telecom Italia (BIT:TLIT)'s (TIM) prized landline grid sent shares in the former phone monopoly down by 6% on Monday.
The long-delayed binding offer from KKR came in with a different structure compared with the preliminary approach, wrongfooting investors, traders said.
Heightening uncertainty, Economy Minister Giancarlo Giorgetti said Rome, which has effectively backed KKR's bid, would consider other options if the offer was rejected.
A deal with KKR for the sale of its main asset is the centrepiece of TIM CEO Pietro Labriola's strategy to reshape the group, burdened with 26 billion euros ($27 billion) of net debt.
As part of the plan and effectively providing indirect endorsement of the strategy, the Treasury is set to take a 20% stake in TIM's grid to oversee an asset deemed as strategic.
The plan has met with strong reservations from TIM's leading investor Vivendi (EPA:VIV). The French media group has pressed for a higher price and questioned the sustainability of the business that will be left behind.
TIM said on Monday that KKR had submitted a binding bid for its domestic fixed access network, adding directors would review the offer once a preliminary analysis has been completed.
The binding offer for TIM's fixed access network is valid until Nov. 8, with the possibility to extend it further until Dec. 20.
Two sources familiar with the matter said KKR's final bid indicated a valuation above 20 billion euros for TIM's fixed access grid, including debt but without some variable components linked to a potential future combination with state backed Open Fiber.
A separate source said a key element to set an exact value for the very complex bid, which TIM advisers have only just started to review, is a 20-year contract establishing the terms of the relation between the network company and TIM's remaining services business.
TWO PARTS
TIM said KKR has also presented a separate, new non-binding bid for its Sparkle business, for which the U.S. fund plans to submit a final bid within four to eight weeks, once the due diligence is completed.
The preliminary approach had included both the domestic grid and Sparkle, which KKR had valued at around 23 billion euros in total when including debt and certain variables, sources have previously said.
The government views the whole of TIM's grid as an asset of strategic relevance for the country.
It also had previously signalled it wanted to secure full control of Sparkle, whose cable network stretches over 600,000 km and it has a direct presence in 32 countries.
Minister Giorgetti said a final decision was up to the board and TIM shareholders, describing the situation as very complex. "The KKR proposal is respectful of the public interest, figures have been widely debated as the state cannot give anything away," Giorgetti said on Monday at a news conference presenting the 2024 budget.
"Let's see the final outcome, if it doesn't work out, we'll think of alternatives," he said.