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KKR Weighs Raising Telecom Italia Bid to Win Over Vivendi

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(Bloomberg) -- KKR & Co. is considering boosting its offer for Telecom Italia SpA after top investor Vivendi SE said the 10.8 billion-euro ($12.2 billion) bid was too low, according to people familiar with the matter.

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The U.S. buyout firm is in the early stages of discussing with advisers how much it would need to increase its proposal to win over reticent shareholders, the people said, asking not to be identified because the information is private.

Telecom Italia said Sunday it had received a preliminary bid of 50.5 euro cents per share from KKR. The private equity firm is debating whether it may need to eventually increase its offer to around 70 to 80 cents per share to seal a deal, the people said.

Some in the buyout firm’s camp believe it could take a bid of around 90 cents per share to convince Vivendi. KKR hasn’t yet decided how high it’s willing to go, and any revised proposal would only come after KKR conducts due diligence. The Italian company hasn’t yet granted KKR access to its books, one person said.

Shares in Telecom Italia rose as much as 10% in Milan trading on Wednesday. Vivendi gained up to 2.6% in Paris.

Vivendi, controlled by French billionaire Vincent Bollore, owns about 24% of Telecom Italia. It said this week that KKR’s bid “doesn’t reflect the core value” of the carrier.

Easy credit and the pressure to spend ballooning amounts of capital has driven dealmaking by buyout firms to a record high this year. Including debt, a potential acquisition of Telecom Italia would rank as one of the biggest-ever private equity takeovers.

No final decisions have been made, and there’s no certainty that KKR’s deliberations will lead to a revised offer, the people said. Representatives for KKR, Telecom Italia and Vivendi declined to comment.

KKR’s offer “looks bold and opportunistic,” and the likelihood of rejection by Vivendi suggests the price could be raised, according to Bloomberg Intelligence analyst Erhan Gurses. Vivendi acquired its stake at an average cost of roughly 1 euro per share, though its last sizeable purchase was at 70 cents per share in 2016, he wrote in a Nov. 22 note.

The French company’s management could view KKR’s move as an opportunity to exit, after a long period of unrealized losses, if the price is high enough, Gurses wrote.

(Updated with Telecom and Vivendi shares.)

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