Shares in Telecom Italia indicated up 30% after KKR’s approach By

MILAN (Reuters) – Shares in Telecom Italia (MI:) were indicated up 30% on Monday, after U.S. fund KKR presented a non-binding proposal to buy Italy’s former phone monopolist valuing it at 10.8 billion euros ($12 billion).

The size of the move prevented shares in Telecom Italia (TIM) to start trading.

Telecom Italia’s (TIM) net debt of 22.5 billion euros lifts the value of KKR’s offer, which is conditional on the government’s backing and the outcome of a four-week due diligence analysis, to 33 billion euros.

TIM said on Sunday KKR had termed as “friendly” its offer of 50.5 euro cents per TIM share, a 45.7% premium to the closing price of the group’s ordinary stock on Friday.

The price, which TIM said was “indicative”, would expose the company’s top investor Vivendi (OTC:) to a steep loss on its 24% stake, for which it spent on average 1.07 euros per share.

A person close to the French media group told Reuters Vivendi believed KKR’s offer did not adequately value TIM.

TIM’s board did not give a view on the proposal.

KKR’s offer comes amid turmoil at Italy’s biggest phone group, which has issued two profit warnings in three months, prompting Vivendi to push to replace CEO Luigi Gubitosi.

Having failed to stem TIM’s revenue decline, Gubitosi had started to look at options to squeeze money from the group’s assets, including the most prized one – the fixed line network, which is deemed strategic by the government.

Italy’s Treasury said on Sunday the government’s decision on whether to use its special powers to block unwanted foreign interest on strategic companies would hinge on plans for the network.

($1 = 0.8872 euros)

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