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Telecom Italia’s shares rose more than 27% Monday morning after U.S. private equity giant KKR made a € 10.8 billion ($ 12 billion) takeover bid for Italy’s largest phone company.
The non-binding proposal values the former telephone monopoly at EUR 0.505 per share in cash, which corresponds to a premium of 45.7% over the closing price on Friday, and rises to more than EUR 33 billion including debt.
Telecom Italia’s reported gross debt surpasses 29 billion euros and S&P further downgraded the company’s credit rating below investment grade last week. The takeover offer should total 33 billion euros, including the debt.
Telecom Italia CEO Luigi Gubitosi has come under pressure from top investor Vivendi after two profit warnings in a single quarter.
The French media giant has long had a conflict with US activist hedge fund Elliott Management, a dispute that led to the eviction of Gubitosi’s predecessor Amos Genish in November 2018.
Before it started trading on Monday, the competitive phone company’s share price had fallen nearly 50% over the past five years.
The Italian Ministry of Finance said foreign interest in Italian companies was “good news for the country”.
Telecom Italia’s board of directors, chaired by former Deputy Governor of the Bank of Italy, Salvatore Rossi, met on Sunday to discuss what KKR described as “friendly,” according to a statement released on Monday.
“For the time being, it is tied to an estimated four-week confirmatory due diligence and approval by key government actors,” the statement said.
Deutsche Bank also said Monday the news was “positive for TI and the wider sector”.
“It also shows TI’s reliance on strategic actions that may be easier to use in private hands,” said Keval Khiroya, telecommunications stocks analyst, Keval Khiroya.
Victoria Scholar, chief investment officer at UK online stockbroker Interactive Investor, said the offer “signals a wider appeal to deep US private equity in the European telecommunications sector” and could help reverse Telecom Italia’s recent fortune.
