Investment fund in talks to raise its bid from €600 million
KKR is still negotiating to acquire Telecom Italia’s submarine cable unit Sparkle, while continuing with due diligence on the assets, according to Reuters.
Sparkle’s international subsea cable network is over 600,000km and its partial sale to KKR is part of Telecom Italia’s plan to offload its fixed infrastructure to reduce debt as a separate NetCo. The strategy is backed by Italy’s right-wing government.
Telecom Italia officially split off its domestic fixed infrastructure in November, although the deal with KKR is opposed by Telecom Italia’s main shareholder, Vivendi, and others. As part of an agreement with KKR, the government authorised the Treasury to spend up to €2.5 billion to take a 15 to 20% stake in the network venture and to take over Sparkle at a later stage.
Reuters reports that at a meeting last week, advisors for the operator and KKR discussed a valuation of around €750-800 million. The previous binding offer made by KKR, of about €600 million, was deemed too low.
The Italian Treasury must also be kept in the loop about the proposed terms and conditions of the deal, as it is co-investing with KKR in Telecom Italia’s fixed network assets. This is on the grounds that they are of strategic national importance.
KKR has until 5 December to complete its ongoing due diligence on Sparkle but Reuters cites an unnamed source who says the deadline could be extended. It seems unlikely that the offer will be on the agenda of Telecom Italia’s board meeting that will take place on 14 December.