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Management turmoil complicates Telecom Italia bid response

Telecom Italia (TIM) is looking to draw up a list of candidates to advise it on a takeover approach from U.S. group KKR. This is because of the banks jockey for position in Europe’s biggest ever private equity deal. But divisions within Italy’s biggest phone group are making it difficult for the company to respond to KKR’s non-binding bid approach, which was valued at 33 billion euros.

Tensions are still running high after a shareholder row had forced Luigi Gubitosi to step down as CEO. This is mainly due to the clash with the group’s top investor Vivendi and independent board members. TIM placed oversight of the group’s strategic assets in the hands of Chairman Salvatore Rossi. This is by setting up a special committee. But top management remains in limbo and the board split on key issues.

The Vivendi representatives and other board members are pushing for a full board reshuffle after Gubitosi refused to formally step down from the board. And this had prevented new general manager Pietro Labriola being named CEO. The committee is meeting further to discuss advisers. But it is not clear whether they will succeed given all the upheaval. Vivendi declined to comment about this. KKR was working with Citi, Morgan Stanley and JP Morgan, as per the sources. They had said that any deal is conditional on support from the Italian government as well as the TIM board.

Goldman Sachs, Intesa division IMI CIB and Bank of America had been lined up for a possible role in advising TIM. Rothschild and Lazard are now also squaring off for a role with TIM. KKR’s non-binding offer is also dependent on a four-week due diligence. This will need a green light from TIM. The Italian government, has special anti-takeover powers to shield companies deemed of strategic importance from foreign bids. Industry Minister Giancarlo Giorgetti said that it was too early to say if the government would use any special powers in regard to KKR. He also said that some of TIM’s assets needed to be under public control. Prime Minister Mario Draghi has already said Italy’s priorities in the matter are to safeguard jobs, technology and the network infrastructure at TIM.

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