Telecom Italia shares decline after Vivendi challenges KKR's offer

Telecom Italia shares experienced a decline in early trade on Monday following a statement from major shareholder Vivendi. Vivendi announced plans to challenge the board's approval of an offer from KKR for Telecom Italia's fixed-network assets. Initially, the shares had risen but later fell by 3% to EUR0.25.

Vivendi to legally challenge decision

Vivendi, which holds a stake of 23.75% in Telecom Italia, expressed its intention to legally challenge the decision made by the company's board to accept KKR's offer. The offer, totaling up to EUR22 billion, including debt, was approved by Telecom Italia's board and mandated Chief Executive Pietro Labriola to finalize and sign the binding contracts. However, Vivendi voiced its regret that the board accepted the offer without first informing and requesting a vote from its shareholders.

Debt reduction and valuation

The sale of Telecom Italia's fixed-network assets to KKR is expected to significantly reduce the company's financial debt by approximately EUR14 billion at the time of closing. This amount surpasses initial expectations set when the sale of the network was announced last year. Telecom Italia's net financial debt as of June 30 stood at EUR26.2 billion.

KKR's offer values the business known as NetCo, excluding its Sparkle submarine-cable business, at EUR18.8 billion. However, this valuation could potentially reach up to EUR22 billion, depending on certain conditions and a part of the debt to the business.

Unsatisfactory separate offer for Sparkle

Telecom Italia's board found a separate nonbinding offer by KKR for Sparkle unsatisfactory. As a result, they have requested Labriola to negotiate for a higher price by December 5.