Telecom Italia gives green light to KKR's grid bid, sources say

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Illustration shows Telecom Italia (TIM) logo

Telecom Italia (TIM) logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo Acquire Licensing Rights

  • KKR's offer values TIM grid at around 20 bln with debt-source
  • TIM to push ahead without shareholder vote on sale-sources
  • Vivendi has warned TIM it could challenge approval in court

MILAN, Nov 5 (Reuters) - Telecom Italia (TIM) (TLIT.MI) directors on Sunday gave a go-ahead to a multibillion euro sale of the telecoms group's prized domestic fixed-line grid to U.S. fund KKR (KKR.N), two sources with knowledge of the matter told Reuters.

Backed by Prime Minister Giorgia Meloni's conservative administration, the deal is a key plank of TIM CEO Pietro Labriola's plan to revive the debt-laden, junk-rated former phone monopoly.

The board started a review of the offer on Friday, convening again on Sunday to deliberate, with 11 out of 14 directors who attended the meeting voting in favour, the sources said. TIM declined to comment.

Based on TIM's final review of KKR's offer, the proposal values TIM's fixed line at around 20 billion euros ($21.5 billion) including debt, a third source with knowledge of the matter said.

The price tag can reach 22 billion euros when including some future payments were a long-awaited combination of TIM's grid with that of state-backed fibre optic rival Open Fiber materialise, the first two sources said.

Following the board's decision, TIM will push ahead with the sale without putting the matter to a shareholder vote, the sources added, despite calls by top investor Vivendi (VIV.PA) to have one.

Vivendi has been seeking a higher price and questioned the sustainability of the remaining domestic service business.

Under Labriola's plan, cash-burning TIM would shed roughly half of its 40,000 domestic staff in the deal and cut its 26 billion euro net debt to focus on its service operations.

To oversee an asset deemed of national strategic importance, Italy's government has authorised the Treasury to spend up to 2.2 billion euros to take a 20% stake in the network alongside KKR.

The Treasury already controls TIM's second-largest investor, state lender CDP.

Italian infrastructure fund F2i is also preparing to take a stake in the grid to bring the holding in Italian hands to 30%-35%.

With its 24% TIM stake, Vivendi has warned TIM's board it is ready to bring a legal challenge to the sale after criticising its approval process, documents seen by Reuters showed.

In Vivendi's view, the sale required an extraordinary shareholder vote and clearance from an internal TIM board committee for related party transactions, given that the Treasury controls CDP and is investing in the grid.

Vivendi has also called on the board to assess an alternative strategy pitched in recent weeks by London-based investment firm Merlyn Advisors and former TIM executive Stefano Siragusa, representing a group of minority investors owning under 3% of TIM. ($1 = 0.9321 euros)

Reporting by Elvira Pollina; Editing by Valentina Za

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