* Decision on possible TI Media sale by Feb. 7-source
* Clessidra ready to consider takeover bid-source
* TI Media may need capital increase-press
(Adds company statement)
By Claudia Cristoferi and Danilo Masoni
MILAN, Jan 17 Telecom Italia will
extend talks with bidders for its television unit Telecom Italia
Media, the company said on Thursday, after it dismissed
initial offers as disappointing.
The former telecoms monopoly had hoped to sell its 77.7
percent stake in the loss-making company by the end of 2012 to
help cut debt of 29.5 billion euros ($39 billion) and focus on
its core telecoms business, but has been hampered by low bids.
Telecom Italia said the bids it had received "reflected the
negative economic and balance sheet trend of TI Media". Its TV
unit is thought by analysts to have lost 100-120 million euros
in 2012, and a press report in La Repubblica daily on Thursday
said the company may need a recapitalisation, which would be the
third in six years.
The group led by Chairman Franco Bernabe said in a statement
on Thursday that it aimed to wrap up talks in order to receive
final and binding offers, but it did not name any bidder or set
a time frame.
A source with knowledge of the matter said earlier on
Thursday that talks would be extended for three weeks with
private equity fund Clessidra and media firm Cairo Communication
- whose bids Telecom Italia previously rejected as too
"No decision was made. The discussions continue with both
potential buyers," the source said, who was leaving a Telecom
Italia board meeting. "A decision will be made by Feb. 7." On
that date, Telecom Italia's board meets to approve full-year
results for 2012 and an update of its strategic targets.
A source close to Clessidra said on Thursday evening the
fund "acknowledged that there was still a little chance of a
Sources had told Reuters on Wednesday that neither Clessidra
nor Cairo had improved the binding offers first presented in
December and considered too low by Telecom, raising the prospect
of a sale not going ahead.
While not selling its TV unit would make little difference
to Telecom Italia's debt levels, a failed sale would mark
another setback for the group, which late last year rejected a 3
billion euro investment offer by Egyptian tycoon Naguib Sawiris.
Telecom Italia is also looking to divest a stake in its
decades-old copper network this year, which could be worth up to
15 billion euros, in order to pay down some debt and invest in
Earlier on Thursday, a source close to Clessidra said the
fund would consider a full takeover bid for Telecom Italia
Media, including the 22 percent listed on the Italian bourse, if
requested to so but would not raise its price.
Its offer values the TV company at 330-380 million euros.
The offer by Clessidra, which has teamed up with fellow
private equity fund Equinox, would mean that Telecom Italia
would make no capital gain on the sale of the TV unit.
Clessidra is seeking control of Telecom Italia Media's two
cash-burning television channels and profitable broadcast
network operator, while the other bidder, Cairo, is interested
only in the TV business.
POSSIBLE CAPITAL HIKE
A takeover bid is mandatory in Italy for any investor
acquiring more than 30 percent of a company, but this can be
waived if the deal is considered a rescue operation.
Telecom Italia Media's La7 channel has gained audience share
thanks to popular talk shows but there are doubts over how long
it can sustain the pace amid an economic recession and
Telecom Italia values its stake in the company at 176
million euros, or just under 0.16 euros per share. Shares in
Telecom Italia Media closed up 1.3 percent at 0.158 euros, off
initial highs as excitement over a possible takeover bid faded.
"The possible failure of the sale process would be a slight
setback in Telecom Italia's deleveraging process but not such
that we believe it would create additional problems for its
refinancing or ability to maintain its current credit rating,"
Espirito Santo analysts said in a note.
Telecom Italia is targeting cash flow generation of more
than 22 billion euros in 2012-2014, against debt maturities of
15.4 billion euros over the same period and an annual dividend
payout floor of 900 million euros.
Rating agency Fitch, which has a BBB rating on Telecom's
debt with a negative outlook, said in November that the group's
end-2013 net debt target of 25 billion euros may be difficult to
(Additional reporting by Stephen Jewkes, Francesca Landini,
Antonella Ciancio and Danilo Masoni; Writing by Silvia Aloisi;
Editing by Sophie Walker and Paola Arosio)