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    KKR to withdraw from TIM deal if due diligence is still a problem

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    Fund holder may still table takeover bid but market conditions have changed since November

    KKR will drop its 10.8 billion-euro ($11.9 billion) takeover proposal for Telecom Italia (TIM) if the due diligence it requested in November is delayed any longer, according to Bloomberg News.

    In a letter expected on April 4, KKR will restate its interest in a possible bid, said Bloomberg’s sources. However, the New York-based private equity firm is clear that it’s now even more keen to review the telco’s finances because much has changed in the four months it has waited for an audit. Telecoms market conditions have shifted and the four month delay over the audit disclosure may have influenced KKR’s thinking. Russia’s invasion of Ukraine and the recent downgrades on Telecom Italia’s credit rating are among the reasons cited in the letter, according to the sources.

    TIM CEO Pietro Labriola is working on an alternative plan for the former national carrier, revealed in January 2022, in which the telco’s landline assets will be merged with Open Fiber. The union of these state-owned national assets would be more in line with the Italian government’s desire for a single national fibre network. 

    In February it was revealed that TIM and Open Fiber are already in discussions to share infrastructure and save money while laying fibre in Italy’s remotest regions. However, the formation of this pact could take several months as it needs approval from European regulators.

    KTIM’s second largest investor, the state bank Cassa Depositi e Prestiti (CDP) would get a majority stake in TIM’s fixed network assets. CDP is also the controlling shareholder of Open Fiber. 

    On Saturday, Telecom Italia confirmed in a statement that it signed a non-disclosure agreement with CDP to start preliminary discussions on integrating its network with that of Open Fiber. This deal is also open to KKR and other funds, said ‘two other people familiar with the matter’. Labriola has another possible plan to separate all Telecom Italia’s commercial services into another unit called ServCo, according to Telecom Italia’s business plan. 

    At the end of March another private equity bidder emerged, as CVC Capital Partners made a non-binding offer for 49 per cent of Telecom Italia’s new enterprise services unit. According to Reuters a number of private equity companies have expressed interest in asset stripping Italy’s telco flagship. TIM plans to discuss CVC’s non-binding bid in a board meeting scheduled for April 7 after the company’s annual general meeting, sources told Bloomberg.