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    Telecom Italia rebuffs KKR takeover due to its cagey conduct over bid terms

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    KKR can’t see the books until it tables a serious bid

    Telecom Italia (TIM) rebuffed a takeover approach from KKR on Thursday, reports Reuters, whose sources say the telco refused to let the US private equity company see its accounts without confirming its bid terms.

    KKR first approached TIM last November with a non-binding offer valuing the company at €10.8 billion but TIM only agreed to open talks last month. Many of the telco’s executives quit the company at the prospect of a KKR takeover. In a statement after a board meeting, TIM said that it cannot grant KKR access to its data as the fund did not validate the terms of its initial €0.505 per share approach, according to Reuters.

    “Should KKR submit a deliverable, complete and attractive offer … the TIM Board of Directors would be open to reconsidering its decision in the interest of all shareholders,” TIM said in statement. The biggest TIM shareholder Vivendi had originally insisted that the KKR bids were too low, though, as Reuters points out, it is well above the current price of €0.31.

    TIM’s rebuff comes as new boss Pietro Labriola is pressing ahead with a strategy to revamp the company centred around a split of its wholesale network operations from its services business. Details of the Labriola’s plan, to discover the telco’s hidden potential, would be fleshed out by the summer.

    In accordance with the plan, TIM has signed a non-disclosure agreement with Italian state lender CDP to discuss a merger of its network infrastructure with that broadband rival Open Fiber. This government-approved deal would call for infrastructure and private equity funds, including KKR’s.

    “KKR ultimately confirmed its interest in exploring any other transactions in the interest of the company, its shareholders and Italy,” TIM said in its statement. KKR already owns some of TIM’s last-mile fixed-line network, having invested €1.8 billion in a 37.5 per cent stake in FiberCop. KKR could use that influence to block TIM’s ambitions to launch a network company. CDP holds a 10 per cent stake in TIM and a 60 per cent stake in Open Fiber and it wants full control of any combined network entity, according to Reuters’ sources.

    Other private equity fund companies are assessing their options for investing in TIM, which must be an attractive destination for investment funds.  At the end of March more private equity bidders emerged and one, 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, including Apollo and Apax Partners, have expressed interest in Italy’s telco flagship. TIM promised to discuss CVC’s non-binding bid in a board meeting scheduled for yesterday (April 7th) after the company’s annual general meeting.