By Mauro Orru
Shares in Telecom Italia SpA jumped on Monday after investment firm KKR & Co. expressed interest in taking the telecommunications company private through an offer valuing it at roughly 10.79 billion euros ($12.17 billion).
Telecom Italia stock opened 27% higher in Milan and, at 0930 GMT, shares were 22% higher at EUR0.42.
The Italian company said late Sunday that it had received a friendly and non-binding indication of interest from KKR, paving the way for a possible buyout offer at EUR0.505 per share--a 45% premium to Friday's closing price--aimed at delisting it.
KKR's indication of interest is conditional on a roughly four-week due-diligence period, and clearance by key government stakeholders. Telecom Italia is subject to special powers from the Italian government aimed at safeguarding national security.
"We would not rule out some political parties may oppose the transaction, however we note the [Prime Minister Mario] Draghi government has a strong market culture and we see room for the government and KKR to find common ground on the fixed access network," UBS analysts said.
KKR already owns 37.5% of FiberCop, a new company that will enable Telecom Italia and other operators to co-invest on fiber coverage in areas of Italy with limited service.
A successful bid would make Telecom Italia the latest European telecommunications company to be taken private this year. Billionaire businessman Xavier Niel, who founded French telecommunications company Iliad in 1999, unveiled an offer to take it private in July, following a precedent set by fellow entrepreneur Patrick Drahi earlier this year when he delisted Altice Europe.
However, an offer to buy out Telecom Italia could face resistance from Vivendi SE, the media conglomerate steered by the family of French billionaire Vincent Bollore, that has amassed a 23.75% stake in Telecom Italia.
Jefferies analysts expect opposition from Vivendi, which has built its stake at an average price of EUR1.07 per share, above KKR's tentative offer.
"Under Italian listing rules, 95% approval is required to enforce a minority squeeze out. But Vivendi continuing as a passive shareholder, lacking the ability to mould TIM into its pan-Euro media strategy, seems unpalatable," Jefferies analysts said.
Analysts at European investment bank Bryan Garnier also expect Vivendi to oppose the deal and push for the replacement of Chief Executive Luigi Gubitosi to try and weigh more on the company's operations and restore its performance without having to spin off its most valuable assets.
Telecom Italia posted lower net profit and revenue for the third quarter and slashed its targets for the year, the second guidance downgrade in less than six months.
Write to Mauro Orru at firstname.lastname@example.org; @MauroOrru94
(END) Dow Jones Newswires