KKR and CVC Capital want to buy Telecom Italia

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But the “indication of interest” faces a series of hurdles on multiple sides.

Private equity giants KKR & Co. and CVC Capital Partners are considering teaming up on a bid for Telecom Italia SpA, according to a report in Bloomberg News. Such a move would help share the financial burden for Europe’s biggest-ever leveraged buyout. The information comes from people with knowledge of the matter, according to Bloomberg.

The two investment firms have held exploratory talks about the potential for a joint offer, according to the people, who asked not to be identified because the information is confidential. 

KKR has been among the most active dealmakers globally since the start of the pandemic. Club deals — where multiple buyout firms partner on an acquisition — are becoming increasingly popular amid a scarcity of potential targets and a desire to hunt ever-larger prey. 

CVC has already been studying a possible acquisition of Telecom Italia for several months, according to the people. The private equity firms are still debating the merits of teaming up, and there’s no certainty they will proceed with a joint offer, the people said. The considerations range from CVC being an equal partner to joining as a minority investor, the people said.

KKR’s offer is “too low”, says TIM’s major shareholder

Representatives for KKR, CVC and Advent declined to comment. Telecom Italia’s press office didn’t immediately respond to emailed queries. 

KKR has made a preliminary bid of 50.5 euro cents per share for Telecom Italia, valuing the company at around 10.8 billion euros ($12.1 billion). CVC and Advent said this week they’re open to working with all stakeholders to identify how to help Telecom Italia.

Vivendi SE, Telecom Italia’s largest shareholder, has already described KKR’s current offer as too low. The would-be U.S. buyer has been considering how much it would need to raise its bid to win over reticent investors, according to Bloomberg News.

The deal also needs approval of the Italian government. Bloomberg has also reported that Mario Draghi, Italy’s technocratic President, has given team KKR the green light. Thisi is because the deal would help him capitalize on the EU aid funds that Italy is expecting.