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KKR approaches sovereign wealth funds to back TIM bid

KKR & Co. has reached out to Saudi Arabia’s sovereign wealth fund as it seeks co-investors to join its proposed acquisition of Telecom Italia SpA, people with knowledge of the matter said.

KKR approached the Public Investment Fund, which is chaired by Saudi Crown Prince Mohammed bin Salman, to gauge its interest in providing capital for the bid, according to the people. It has also held talks with other sovereign wealth funds and infrastructure investors about teaming up, the people said, asking not to be identified because the information is private.

The PIF would take a passive role in any deal, the people said. Discussions are ongoing, and the Saudi fund hasn’t decided yet whether to join the KKR consortium, the people said.

Sovereign wealth funds are increasingly playing an important role supporting private equity firms on large takeover bids. The Abu Dhabi Investment Authority and Singapore’s GIC Pte backed the more than $30 billion acquisition of Medline Industries Inc. last year by a group of buyout firms.

Representatives for KKR, the PIF and Telecom Italia declined to comment.

Friendly bid
New York-based KKR made a preliminary takeover proposal for Telecom Italia in November valued at about 10.8 billion euros ($12.2 billion). The private equity firm said last month that it’s pursuing a friendly bid and wants to work to gain the board’s support for its offer.

KKR is attracted to Telecom Italia’s fixed network, which the former monopoly has gradually upgraded from copper to high-speed fiber. A deal, if successful, would rank as one of the biggest purchases ever by a private equity firm in Europe’s telecommunications industry.

Telecom Italia has picked Goldman Sachs Group Inc. and LionTree to advise on KKR’s proposal, as well as to explore alternatives. KKR faces a big hurdle in the form of France’s Vivendi SE, Telecom Italia’s largest investor, which has said it’s in for the long haul and has no plans to sell its stake.

Vivendi has also insisted that the KKR bid doesn’t reflect Telecom Italia’s fair value. KKR has been discussing with advisers how much it would need to increase its bid to win over reticent shareholders, Bloomberg News has reported.

Telecom Italia’s former Chief Executive Officer Luigi Gubitosi quit in November amid a clash over strategy with Vivendi and after a surprise profit warning the previous month. The telecom group hired Spencer Stuart Inc. to draw up a succession plan and intends to name General Manager Pietro Labriola as its new CEO, people familiar with the matter said previously.

Saudi spending
The PIF is one of the world’s largest sovereign wealth funds with assets of about $500 billion, according to its website. It’s become a more active overseas investor in recent years. The fund received $40 billion from Saudi Arabian government reserves in 2020 to help it take advantage of market turmoil at the time.

That year it bought stakes in companies including Citigroup Inc., Facebook Inc. and cruise-ship operator Carnival Corp., before selling most of these holdings after just a few months. In 2021, the PIF completed its long-running takeover of U.K. Premier League soccer team Newcastle United FC and also acquired a 30% stake in Italian supercar maker Horacio Pagani SpA. Bloomberg

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