Reuters – Clessidra Mulls Takeover Bid for Telecom Italia Media

Italian private equity fund Clessidra would consider a full takeover bid for Telecom Italia Media, a source close to the fund said, as the board of Telecom Italia met to decide what to do with its stake in the loss-making company, Reuters reported. Telecom Italia had hoped to sell its 78 percent stake in Telecom Italia Media by the end of 2012 to help cut its debt of 29.5 billion euros ($39 billion) and focus on its core telecoms business, but has been hampered by low bids. Clessidra has already submitted a binding offer for Telecom Italia Media – seeking control of its two cash-burning television channels and profitable broadcast network operator – that Telecom Italia dismissed in December as being too low.

(Reuters) – Italian private equity fund Clessidra would consider a full takeover bid for Telecom Italia Media, a source close to the fund said, as the board of Telecom Italia met to decide what to do with its stake in the loss-making company.

Telecom Italia had hoped to sell its 78 percent stake in Telecom Italia Media by the end of 2012 to help cut its debt of 29.5 billion euros ($39 billion) and focus on its core telecoms business, but has been hampered by low bids.

Clessidra has already submitted a binding offer for Telecom Italia Media – seeking control of its two cash-burning television channels and profitable broadcast network operator – that Telecom Italia dismissed in December as being too low.

Italy’s biggest telecom operator then said that it wanted to see improved offers. Sources with direct knowledge of the negotiations said Telecom Italia also told interested parties that it would consider offers for a full takeover that would include the 22 percent listed on the Italian bourse.

On Thursday the source close to Clessidra said the fund would consider launching a full takeover bid for the company if requested but would not raise its price. Its offer values the TV company at 330-380 million euros.

“Clessidra will not change the size of its offer but could be flexible on how the deal is done,” the source said. “The ball is in Telecom’s court. If they asked for a full takeover bid Clessidra could consider it providing there are no extra costs.”

The offer by Clessidra, which has teamed up with fellow private equity fund Equinox, would mean that Telecom Italia would make no capital gain on the sale of the TV unit. Another bid by media firm Cairo was also rejected.

Telecom Italia values its 78 percent stake in the company at 176 million euros, or just under 0.16 euros per share. By 1118 GMT shares in Telecom Italia Media were up 3.4 percent to that price on the possibility of a takeover bid.

Telecom Italia said it could not comment as the board meeting was underway.

POSSIBLE CAPITAL HIKE

A takeover bid is mandatory in Italy for any investor acquiring more than 30 percent of a company, but this can be waived if the deal is considered a rescue operation.

Telecom Italia Media is thought by analysts to have lost 100-120 million euros in 2012, and a press report in La Repubblica daily on Thursday said the company may need a recapitalisation, which would be the third in six years.

Its La7 channel has gained audience share thanks to popular talk shows but there are doubts over how long it can sustain the pace amid an economic recession and cut-throat competition.

While the cost of a possible recapitalisation or failed sale would be a drop in the ocean for Telecom Italia’s debt, it would mark another setback for the group, which late last year rejected a 3 billion euro investment offer by Egyptian tycoon Naguib Sawiris.

The group also said in December it would take more time to consider the sale of its copper network, possibly worth up to 15 billion euros.

Telecom Italia is targeting cash flow generation of more than 22 billion euros in 2012-2014, against debt maturities of 15.4 billion euros over the same period and an annual dividend payout floor of 900 million euros.

Rating agency Fitch, which has a BBB rating on Telecom’s debt with a negative outlook, said in November that the group’s end-2013 net debt target of 25 billion euros may be difficult to achieve. (By Stephen Jewkes; Additional reporting by Claudia Cristoferi, Francesca Landini and Danilo Masoni; Writing by Silvia Aloisi; Editing by Sophie Walker and Paola Arosio)