KKR offer prompts Telecom Italia board showdown over CEO - Reuters

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The Tim logo is seen at its headquarters in Rome, Italy November 22, 2021. REUTERS/Yara Nardi/File Photo

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• KKR has tabled $12 billion proposal to take TIM private
• Under fire from top investor, CEO offers to give up powers
• Auditors raise fresh concerns over costly soccer deal

MILAN, Nov 26 (Reuters) - Telecom Italia (TIM) (TLIT.MI) looked set to lose its fourth CEO in six years on Friday after Luigi Gubitosi told the board he was ready to quit the role if that helped speed their decision over KKR's $12 billion takeover proposal.

The board of Italy's biggest telecoms company began a meeting at 1400 GMT at which it was also due to discuss the impact on earnings of a soccer rights deal that has failed to help revenue and contributed to two profit warnings since July.

TIM's disappointing results have strengthened top investor Vivendi's (VIV.PA) hand in pushing for a change at the helm.

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Gubitosi, who was brought in by rival TIM investor Elliott in 2018, told unions on Thursday he had lost the confidence of a majority of directors, a person with knowledge of the matter told Reuters.

In a letter to the board sent on Thursday, a copy of which was seen by Reuters, Gubitosi offered to relinquish his executive powers without stepping down as a director.

That means that his responsibilities would need to be reassigned to another director, or else a board member would need to resign to free up a seat for a new CEO.

One solution could be to name current TIM Brazil CEO Pietro Labriola as director general with Chairman Salvatore Rossi taking executive powers, two people close to the matter said.

Labriola, designated as Gubitosi's replacement under TIM's contingency plans, could eventually be appointed CEO, one of the sources said, adding the situation was in flux and things could still change.

STALLING

Gubitosi, in his letter to the board, criticised directors for stalling on KKR's offer to please some of the group's shareholders.

He rejected speculation that he was close to KKR, and urged the board to grant the New York-based fund access to company data and appoint advisers, two steps which are expected to be taken on Friday.

TIM's board first examined on Sunday KKR's non-binding proposal to take it private in a 33 billion euro deal when including debt.

The offer followed a downgrade of TIM's debt that pushed it further into junk territory a week ago, which two sources said had hastened KKR's decision because TIM was at risk of breaching bank covenants.

Auditors have raised fresh concerns over the 1 billion euro deal Gubitosi struck with DAZN to stream Italy's top-flight soccer matches, another two sources close to the matter told Reuters.

One of the sources said a further downgrade to TIM's financial outlook may not be ruled out, in what would be a new blow to holders of TIM debt, which is already equal to around four times its core profit.

STRATEGIC ASSET

The face-off between Gubitosi and Vivendi is the latest boardroom crisis at TIM, which has had three CEOs since 2015, when the French media group began building its 24% stake.

Gubitosi first brought KKR onboard last year, striking a 1.8 billion euro deal that handed the fund a 37.5% stake in TIM's so-called last-mile network reaching into people's homes.

The takeover offer for the whole of TIM comes as Italy prepares to spend 6.7 billion euros of European Union recovery fund to speed up ultra-fast broadband rollout across the nation.

TIM's fixed network, which the government is keen to see upgraded to fibre, is Italy's main telecoms infrastructure and Rome has said its response to KKR will hinge on plans for the network.

Rome has special powers to block moves on strategic companies such as TIM but the executive of Prime Minister Mario Draghi has hailed KKR's interest as good news for Italy.

Sources have said KKR, which consulted the government before tabling its offer, plans to carve out the network and give state investor CDP - currently TIM's second-biggest shareholder - a leading role in overseeing it.

($1 = 0.8874 euros)

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Writing by Valentina Za; Editing by Alexander Smith and Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.

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