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KKR buyout offer sends Telecom Italia shares surging 22%


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Telecom ItaliaStocks rose by more than 22% after U.S. Private Equity giant KKRA 10.8 Billion Euro ($12 Billion) purchase offer was made to buy out Italy’s largest telephone company.

This proposal is non-binding and values the ex-monopoly phone company at 0.505 euro per share in cash. It represents a 45.7% premium to Friday’s close share price. The value rises to over 33 billion euros, including debt.

Telecom Italia reported a gross debt exceeding 29 billion euro. S&P last week downgraded the company’s credit rating further below investment grade level.According to reports, the total buyout price is closer than 33 billion Euros if you include debt.

After two quarters of profit warnings, Telecom Italia CEO Luigi Gubitosi was under severe pressure from Vivendi.

French media titan Gubitosi was at war with Elliott Management, an activist hedge fund in the United States. The tussle resulted in Gubitosi being ousted by Amos Genish (November 2018).

Before Monday’s trading began, the phone company was experiencing a dramatic drop in share prices of nearly 50% in the five previous years.

The Treasury of Italy stated that foreign interest in Italian businesses is good news for the country.

Telecom Italia’s board met Sunday under the presidence of Salvatore Rossi, former Bank of Italy Deputy governor. The offer was described by KKR “friendly,” as per a Monday release.

“For the time being, it is conditional – among others – to an estimated four-week confirmatory due diligence, as well as clearance by key government stakeholders,” the statement added.

Deutsche Bank also stated Monday that they were “positive” for TI as well as the larger sector.

Keval Khiroya, a telecoms equity analyst stated that “it also shows how dependent TI is upon strategic action”, which might be more easily served in private hands.”

Victoria Scholar, the head of investment for British stockbroker Interactive Investor said that the offer “signals an enlarged appeal to deep-pocketed U.S.private equity of the European telecoms industry sector” and may help reverse Telecom Italia’s recent fortunes.