Italian Treasury ready to back KKR-CDP joint bid for Telecom Italia’s grid

By Elvira Pollina and Giuseppe Fonte

ROME (Reuters) -Italy’s Treasury is ready to back a joint purchase proposal for Telecom Italia (BIT:)’s (TIM) grid by KKR and state lender CDP in a bid to end a stalemate over the sale process of the phone group’s prized asset, sources told Reuters.

TIM directors on Thursday set a final deadline of June 9 for potential improved offers by the U.S. private equity firm and a rival consortium comprising CDP and Australian fund Macquarie, worth 21 billion euros ($23.1 billion) and 19.3 billion euros respectively.

In recent talks with involved parties, the Treasury said it would welcome a joint bid for TIM’s grid, two sources familiar with the matter told Reuters on Friday.

One of the sources said government officials were pushing for CDP to join KKR’s bid, dropping its separate proposal.

The ministry would also be open to involving infrastructure fund F2i in the process, should talks over a joint bid prove feasible.

All interested parties declined to comment.

After the board meeting, TIM said the two bids were “not yet adequate”, adding at least one of the bidders had expressed its readiness to improve its non-binding offer.

Separate sources with knowledge of the matter said on Thursday KKR had expressed its willingness to work further on its bid, which is seen as the stronger alternative by TIM CEO Pietro Labriola.

Buoyed since early trade, Telecom Italia shares rose further after Reuters reported the developments, gaining as much as 6%.

The sale of the network is a key plank in Labriola’s plan to turnaround the struggling former phone monopoly by slashing its 25 billion euro debt pile.

Labriola’s strategy has been challenged by the company’s top investor Vivendi (OTC:), which is seeking a valuation of 31 billion euros for the phone group’s main asset.

KKR, which has already invested 1.8 billion euros in TIM’s grid, has bid for a controlling stake in a unit comprising TIM’s entire domestic fixed access network and submarine cable business Sparkle.

CDP and Macquarie are co-investors in fiber optic company Open Fiber and have made a rival offer for Telecom Italia’s landline grid as part of a plan to create a unified national network operator.

Prime Minister Giorgia Meloni’s administration can use its so-called “golden powers” to set conditions or block bids for strategic assets including TIM’s network.

KKR left the door open for the government to have a minority stake directly or through state-backed entities, although people briefed about the matter previously said the fund had concerns to team up with CDP due to antitrust issues.

($1 = 0.9081 euros)

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