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Telecom Italia Bids for BT Unit Hit by Scandal

Daniele Lepido and Thomas Seal
Telecom Italia Bids for BT Unit Hit by Scandal

(Bloomberg) -- Telecom Italia SpA made a takeover offer for BT Group Plc’s Italian business, giving momentum to an asset sale that would help the U.K. telecommunication giant move on from an accounting scandal on the continent, according to people familiar with the matter.

The bid from Italy’s largest phone company is non-binding, said the people, who asked not to be identified because the process isn’t public. Hong Kong conglomerate CK Hutchison Holdings Ltd.’s Wind Tre SpA and fiber carrier Retelit SpA also expressed interested in the unit, they said. BT Italia is seen as potentially valuable to a buyer because it serves major corporate customers including Eni SpA, Fiat Chrysler Automobiles NV and Mediaset SpA.

Representatives for BT Italia, London-based BT, Telecom Italia, Wind Tre and Retelit declined to comment.

A sale of BT Italia would close a painful chapter for its owner, which took a 530 million-pound ($680 million) writedown in 2017 in the wake of revelations of improper accounting practices at the unit. A deal would also hand Philip Jansen, the Worldpay Inc. boss who starts next month as BT’s chief executive officer, a clean slate. The former British monopoly is restructuring its Global Services IT business, cutting thousands of jobs and shedding assets as it retreats from data storage contracts.

Financial details of the bids weren’t immediately available. BT Italia had revenue of about 390 million euros ($450 million) in fiscal 2017-2018 and a loss before interest, taxes, depreciation and amortization, people familiar with the matter said in December.

For Telecom Italia, the offer comes as the indebted phone company prepares for a corporate-governance showdown between its two largest shareholders.

Shareholder Meeting

French media company Vivendi SA lost control of Telecom Italia to U.S. activist Elliott Management Corp. last May and has been seeking to propose a new slate of directors and restore its influence.

The Telecom Italia board agreed on Monday to set the carrier’s annual shareholder meeting for March 29, the company said in an emailed statement. That’s earlier than the previous plan for April and will allow investors to vote on Vivendi’s slate.

Bloomberg reported last week that the shareholder meeting would probably be moved earlier as directors backed by Elliott sought a compromise with Vivendi.

Telecom Italia shares rose 0.8 percent at 3:09 p.m. in Milan, while BT shares were down 1.1 percent in London.

Valuation Squeeze

For BT, a sale of the Italian division would be a good outcome for BT if it could generate any proceeds from the sale of BT Italia, said Matthew Bloxham, an analyst at Bloomberg Intelligence. Buyers could squeeze BT on valuation and it’s hard to put a figure on fair value for the unit because disclosure is limited, he said.

In October, BT sold a subsidiary focused on smaller enterprises in Germany. Head of global services Bas Burger, said BT will continue to become “more asset-light.” In the same month, BT named Jansen to succeed Gavin Patterson, turning to a corporate restructuring expert to overhaul the carrier after profit warnings and a clash with Britain’s telecom regulator.

(Updates with confirmation of annual meeting in eighth paragraph.)

--With assistance from Angelina Rascouet.

To contact the reporters on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net;Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Kenneth Wong, Kim Robert McLaughlin

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