Telecom Italia boss offers to resign after KKR takeover offer

Telecom Italia is entering its sixth management overhaul in less than nine years after Luigi Gubitosi offered his resignation as chief executive before an extraordinary board meeting scheduled for Friday afternoon.

Pietro Labriola, the head of the Brazilian division of Telecom Italia, has been approached to succeed Gubitosi according to three people involved in the talks. However, board members and others familiar with the talks in Paris and Rome predict there could be some last-minute surprises as informal internal talks this week have been “particularly heated”.

Italy’s finance ministry, which controls a 10% stake in the company through public investor Cassa Depositi e Prestiti, will also have a say in any management overhaul, according to the population.

Telecom Italia did not respond to a request for comment. Vivendi, the group’s largest shareholder, and Italian officials declined to comment. Economic Development Minister Giancarlo Giorgetti, however, said this week “the Italian government does not [influence the board’s] management decisions ”.

Vivendi, the French conglomerate which owns a 24 percent stake in Telecom Italia, had previously reported that it held Gubitosi responsible for the poor performance of the company and had started to agitate for a change of management. Several other board members had requested Friday’s meeting to discuss the CEO’s future, according to people familiar with the board discussions.

However, attention shifted last Sunday following KKR’s non-binding € 33 billion offer to privatize Telecom Italia.

The US buyout fund offered € 0.505 per share in cash, a 45% premium over the company’s closing price last Friday, which would give the company a net worth of € 10.7 billion. He has about 22.5 billion euros in net debt.

If successful, the transaction would represent the largest buyout of private equity from a European company in history.

But Vivendi found the price offered by KKR too low, about half the average it paid to build up its stake in 2016 according to analysts.

According to several people involved in the talks, the French conglomerate also believes that the offer of the American buyout fund was launched with the help of Gubitosi behind their back.

KKR has already worked closely with Gubitosi after acquiring a 37.5% stake in FiberCop, Telecom Italia’s “last mile” network, for 1.8 billion euros last year.

Vivendi and KKR declined to comment on this suggestion when it was strongly rejected by Telecom Italia.

Telecom Italia has also seen several other issues this year: it issued two profit warnings in the space of three months, a complex merger plan with rival Open Fiber appears to have failed, and a Serie A broadcast rights deal with the UK DAZN platform has not been as profitable as expected.

Telecom Italia shares have fallen almost 40% since Gubitosi took office in November 2018 and in the middle of this month.

According to several people close to the CEO, Gubitosi has chosen to anticipate a probable vote of no confidence by proposing to step down. In a letter to board members on Thursday evening, Gubitosi said he wanted to facilitate talks with KKR, the start of the due diligence process and the choice of an advisor by stepping down, according to three people with knowledge of the content. of the letter. .

The continuation of the repurchase operation at this stage also depends on the Italian government, which has a veto right over foreign repurchases of strategic assets.

Prime Minister Mario Draghi said this week at a press conference that the government’s priority would be to protect Italian jobs, technology and the network. He set up a working group made up of ministers to examine Telecom Italia’s options.

Separately, in a press statement Thursday evening, a spokesperson for Draghi denied that the prime minister had given the green light to the potential deal with the KKR.

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