KKR survives Telecom Italia near-miss

KKR looks to have dodged a Telecom Italia bullet. The hapless operator’s shares fell 13% on Thursday after new Chief Executive Pietro Labriola spurned a tentative 10.8 billion euro offer from the buyout group. His alternative self-help plan is a carbon copy of KKR’s breakup proposals, confirming their logic and investors’ doubts about his execution abilities. But with Telecom Italia’s equity now worth around 6.5 billion euros – less than when KKR first floated its 47.5% premium – there’s every chance it would have been overpaying.

KKR’s interest was always contingent on getting a closer look at the former monopoly’s books. That was prudent given the dire nature of their contents. Besides a record 8.3 billion euro loss, the result mainly of goodwill and tax write-downs, Telecom Italia’s EBITDA after leases plunged to 4.3 billion euros in 2021 from 5.9 billion euros the previous year. With hindsight, KKR would have been foolish to dangle such a juicy carrot in front of shareholders’ noses. Reuters