* Board evaluates KKR proposal in special Sunday meetingGoal
is to
spin off fixed line, run it as govt-regulated asset
* Embattled TIM CEO pushing to revive single-network plan
* Rival CVC, Advent also open to studying solution for TIM
(Adds details)
By Elvira Pollina, Valentina Za and Pamela Barbaglia
MILAN, Nov 21 (Reuters) - Telecom Italia (TIM)
said on Sunday it had received a 10.8 billion euros ($12
billion) approach from U.S. fund KKR aimed at taking
Italy's biggest phone group private.
KKR's move comes as TIM's CEO Luigi Gubitosi battles for
survival after coming under fire from top investor Vivendi
following two profit warnings in three months.
TIM said KKR had set an indicative price of 0.505 euros for
its possible buyout offer -- a 45.7% premium to the ordinary
shares' closing price on Friday. KKR would also offer the same
price for TIM's savings shares.
The TIM board, chaired by former Bank of Italy official
Salvatore Rossi, met for several hours on Sunday afternoon but
in a short statement it gave no indication of whether it would
support the approach. It noted that KKR had termed its action as
"friendly" and aimed at winning the backing of the company.
Vivendi, which is pushing to replace Gubitosi, believes
KKR's offer does not adequately value TIM, a person close the
French media group said. Vivendi faces a steep capital loss on
its 24% TIM stake for which it has spent on average 1.071 euros
a share.
A new owner would also have to assume the group's 29 billion
euro gross debt.
The government, which is preparing to tap billions of euros
of European Union recovery funds to boost broadband connectivity
in Italy, is aware of the need to find a way to shore up the
former telecoms monopoly and protect its 42,500 domestic
workers, sources have said.
KKR'S CURRENT ROLE
Gubitosi brought KKR onboard last year in a 1.8 billion euro
deal that handed the New York-based fund a 37.5% stake in
FiberCop, the unit holding TIM's last-mile network connecting
street cabinets to people's homes.
Vivendi sees Gubitosi as a short-term solution for TIM,
people close to the matter have said. One person said on Sunday
KKR's plan may buy Gubitosi a few more months.
TIM's fixed line business is its most prized asset and is
deemed strategic by Rome which can block any unwanted moves.
Unable to stem TIM's revenue haemorrhage, Gubitosi has
started looking at ways to squeeze money out of TIM's assets,
revisiting in particular a plan to merge TIM's fixed-line grid
with that of fibre optic rival Open Fiber.
Sponsored by the previous government, that project had run
aground under Prime Minister Mario Draghi.
KKR's plan would see TIM carve out its fixed network to be
run as a government-regulated asset along the model used by
energy grid company Terna or gas grid firm Snam
, two sources close to the matter said earlier on
Sunday.
Separately private equity firms CVC and Advent have studied
possible plans for TIM, working with former TIM CEO Marco
Patuano, now a senior adviser to Nomura in Italy.
A spokesperson for the two funds said they were open to
working with all stakeholders on a solution to strengthen TIM,
denying any contacts with Vivendi.
A spokesperson for Vivendi said the French media group
remained ready to work alongside Italy's authorities and
institutions for TIM's long-term success.
Vivendi had wanted TIM to retain control of the combined
network assets in any Open Fiber deal.
However, ceding control increasingly appears as the only way
to overcome political and regulatory opposition to the single
network plan.
TAKEOVER SHIELD
To oversee a strategic asset such as TIM's fixed line, state
investor CDP has taken a 9.8% stake becoming the group's
second-largest investor after Vivendi.
KKR's plan can only proceed with the government's assent
because Rome has special anti-takeover powers to shield
companies deemed of strategic importance from foreign bids.
TIM's fixed network is also a key asset supporting the debt
burden which was cut further below the investment grade level by
credit rating agency S&P on Friday.
TIM's revenue have shrunk by a fifth over the past five
years hit by aggressive competition at home from rivals such as
Iliad, Vodafone, Wind Tre and Fastweb.
($1 = 0.8859 euros)
(Additional reporting by Agnieszka Flak ; editing by Andrew
Heavens, David Evans and Keith Weir)
Vodafone (VOD)