Telecom Italia rises on speculation KKR ready to make formal bid

Shares in Telecom Italia (TIM) rose as much as 4.4% on Monday as investors bet on the possibility that U.S. private equity group KKR is ready to launch a formal takeover offer for Italy’s biggest telecoms company following a non-binding approach last month.

KKR’s bid approach, which values TIM at 33 billion euros, ($37.21 billion) including debt, is conditional on support from TIM and the Italian government, as well as a four-week due diligence that needs a green light from the company’s board which is due to meet on Dec. 17.

Telecom Italia’s biggest shareholder Vivendi has given KKR’s approach a cool reception. KKR’s potential offer of 0.505 euros per share is below the price at which Vivendi books its 24% TIM stake.

On Saturday, Italian daily La Stampa reported that TIM’s board may reject KKR’s request to access TIM’s books before formalising its takeover offer.

KKR is expected to still go ahead and launch its bid without a due diligence process to let the market decide over the bid, the newspaper added.

KKR declined to comment. Telecom Italia was not available for comment. Vivendi declined to comment.

“We would not rule out that KKR could increase its offer price above 0.505 euros to persuade Vivendi or … transform its offer from friendly to hostile,” Intesa Sanpaolo analysts wrote in a report.

Telecom Italia’s shares were up 1.5% at 0.4479 euros by 1340 GMT, compared with a 0.4% rise in Milan’s blue chip index.

Sources have said Vivendi is trying to build an alliance with Italy’s state lender CDP, which is TIM’s second largest investor, to pursue with an alternative plan to revive the phone group’s fortunes.

Reversing a long-standing stance, Vivendi had said it was open to evaluate the hypothesis of a state control of TIM’s network.

“Visibility remains low on Vivendi’s plan B as well as on CDP’s position, which is key for any potential evolution of the story,” Intesa Sanpaolo analysts said. Reuters