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Telecom Italia will keep bankers busy in 2022

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The Tim logo is seen at its headquarters in Rome, Italy, November 22, 2021. REUTERS/Yara Nardi

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MILAN, Nov 29 (Reuters Breakingviews) - Telecom Italia (TLIT.MI) could be the meal ticket that keeps European deal advisers well-fed in 2022. The struggling telecom group on Friday said it had set up a board committee to study a non-binding offer from buyout group KKR (KKR.N). As with Telecom Italia’s leveraged buyout in 1999, it’s a potential bonanza for bankers, lawyers and consultants.

KKR’s bid, worth 33 billion euros including debt, would be Europe’s largest private equity buyout ever, according to Refinitiv, bringing hefty fees for merger advice and financing. But other bidders may get involved, and existing Telecom Italia shareholders including Vivendi (VIV.PA) and the Italian state will have a say. A takeover could also be the first step towards a breakup of the company.

At present, none of the players have officially retained advisers. KKR is working with U.S. lenders Citi (C.N), Morgan Stanley (MS.N) and JPMorgan (JPM.N), sources with direct knowledge of the situation told Breakingviews. Rival banks are circling Telecom Italia, which lost its fourth boss in six years on Friday after Chief Executive Luigi Gubitosi resigned. The telco may retain the services of Goldman Sachs (GS.N) and Bank of America (BAC.N). But Rothschild (ROTH.PA), Lazard (LAZ.N) and Italian lender UniCredit (CRDI.MI) are also scrambling to get a mandate.

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Vivendi, Telecom Italia’s largest shareholder, is on a war footing as KKR’s offer of 0.505 euros a share is barely half the average price Vincent Bolloré’s company paid for its 24% stake. The French tycoon is likely to rely on Italy’s famed Chiomenti law firm but has not yet selected a banking adviser, although Mediobanca (MDBI.MI) may be willing to play a role. Meanwhile, state-controlled Cassa Depositi e Prestiti, which owns 10% of Telecom Italia, could opt for Credit Suisse (CSGN.S).

The saga has already attracted the interest of rival private equity group CVC, which has Nomura (8604.T) adviser and ex-Telecom Italia boss Marco Patuano on its side. Meanwhile, the Italian government of prime minister and former Goldman Sachs banker Mario Draghi is arguably the most important player, given Rome’s ability to veto a deal.

Bankers are already enjoying what looks set to be the biggest year for deals ever. As of Nov. 18, M&A activity in western Europe had reached $1.1 trillion, up 46% on the previous year, according to Refinitiv. Private equity-backed M&A jumped 141% to $262 billion in the same period. Telecom Italia looks set to keep investment bankers employed next year, too.

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CONTEXT NEWS

- Telecom Italia lost its fourth chief executive in six years on Nov. 26 after Luigi Gubitosi stepped down.

- Italy’s former telecom monopoly appointed Pietro Labriola, the head of Telecom Italia’s Brazil unit, as general manager.

- U.S. private equity group KKR has made a non-binding cash offer worth 0.505 euros per share, valuing the company at 10.8 billion euros, excluding debt.

- Telecom Italia said on Nov. 26 it has set up an ad hoc committee of the board, led by Chair Salvatore Rossi, to study KKR’s offer. It will appoint advisers to help it assess the bid.

- Telecom Italia shares were down 3% at 0.466 euros by 1000 GMT on Nov. 29.

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Editing by Peter Thal Larsen and Oliver Taslic

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