TELECOM Italia agreed on Sunday (Nov 5) to sell its landline network to KKR & Co, a landmark 22 billion euros (S$31.95 billion) deal backed by Italy’s government.

The phone carrier’s board of directors, after a marathon meeting that started on Friday, approved the grid sale to the US private equity giant on Sunday without making it conditional on a vote by shareholders, it said. The decision was made despite opposition from the carrier’s biggest shareholder Vivendi.

KKR valued the network at 18.8 billion euros, but the overall value of the deal is as much as 22 billion euros based on what can be earned if the grid is merged with that of small rival Open Fiber. The deal, which Telecom expects to close by the summer of 2024, should allow the company to reduce its debt by 14 billion euros, it said.

The board didn’t approve KKR’s offer for Telecom’s submarine cable unit Sparkle and extended to Dec 5 a deadline to verify the possibility of a higher offer. The company was previously valued at about one billion euros.

The decision marks a victory for chief executive officer Pietro Labriola, the main architect of the network sale plan, and is a welcome outcome for Prime Minister Giorgia Meloni’s administration, as the deal with KKR will permit the one-time state-controlled monopoly to slash its debt pile while allowing the government to retain oversight over an asset deemed strategic.

The 11-to-3 board decision was immediately criticised by Vivendi, which has long opposed plans to dispose of the network, Telecom Italia’s most valuable asset.

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In a statement just minutes after the announcement, Vivendi said it “deeply regrets” the board decision, and that it “will use any legal means at its disposal to challenge this decision and protect its rights and those of all shareholders”.

The media conglomerate already called for an extraordinary shareholder meeting where it could try to rally support to halt the sale.

Telecom Italia has for months sought to sell the grid. While the company is privately owned, Meloni’s government and the one led by Mario Draghi before her, played a key role in engineering a deal that would allow the government to maintain influence, given the company’s employment level and the geopolitical importance of the telecommunication network it controls.

After different options failed, the government-backed the plan by KKR and readied funds to invest directly in the company to retain control.

Getting the green light from the board became even more complicated at the end of last month, after a London-based investment firm, Merlyn Advisors, presented a surprise plan to halt the sale and to replace Labriola. While Merlyn only publicly owns about 0.006 per cent of Telecom Italia, the pitch got immediate traction with Vivendi, which has been asking for at least 30 billion euros to sell the asset.

In a statement after the board decision, Merlyn said it will pursue legal action to halt the sale and called for a shareholders meeting. BLOOMBERG