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Italy’s state lender plans to raise offer for Telecom Italia grid

Italy’s state-backed lender is working on a higher bid for Telecom Italia SpA’s landline network, in a move aimed at winning control of an asset considered to be of national interest, according to people familiar with the matter.

The lender, Cassa Depositi e Prestiti SpA, is planning to increase its offer by about €2 billion ($2.2 billion), for a total value exceeding €20 billion, the people said, asking not to be named discussing private information. No final decision has been made and terms could still change, the people said.

Telecom Italia shares rose as much as 3.4% in Milan on Tuesday.

The state lender, known as CDP, faces a rival offer from the US’s KKR & Co., which is also working to improve its bid for the network, according to two people who declined to elaborate on the terms. Telecom Italia’s board said earlier that it expects new bids by April 18.

Telecom Italia’s biggest shareholder, France’s Vivendi SE, has repeatedly said it set a valuation of around €30 billion on the grid.

“A possible bidding war between CDP and KKR aimed at improving their respective offers has a clear benefit for Telecom Italia from a speculative-appeal point of view,” Bestinver analyst Andrea Trovarelli wrote in a note Tuesday. Still, the improvement “could not be enough to meet Vivendi’s desires.”

Spokespeople for Cassa Depositi, the Italian government, KKR and Telecom Italia declined to comment.

Read more: Telecom Italia Calls on State Lender, KKR to Raise Bids for Grid

The original non-binding bids by Cassa Depositi and KKR both valued the grid, Telecom Italia’s most valuable asset, in a range of €18 billion to €20 billion. That included debt and a performance-based “earnout,” according to people familiar with the matter.

Italy’s government, which owns nearly 10% of the phone carrier through Cassa Depositi, has signaled that the network is a strategic asset that must retain a level of public oversight.

Rome has the power to veto certain deals involving strategic assets, and its support is crucial for potential investors in Telecom Italia, a former monopoly that’s under pressure to cut debt amid rising interest rates. Bloomberg

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