It’s all going KKR & Co.’s way. The U.S. buyout firm’s tentative 11 billion euros ($12 billion) takeover bid for Telecom Italia SpA received a cautious welcome from Rome on Sunday. Now, rival CVC Capital Partners is considering partnering with KKR, removing a potential competitor for Italy’s national phone company. Telecom Italia boss Luigi Gubitosi offered his resignation to accelerate the transaction, Bloomberg News reported on Thursday.

KKR has certainly done Italy a favor by legitimizing the idea that Telecom Italia is best off broken up and run by a completely fresh pair of eyes. But it should not be seen as the only option for the company.

Telecom Italia’s board meets today. It must decide whether to grant KKR access to its books to evaluate its 50.5 euro-cents-per share proposal — roughly the stock’s pre-Covid level. Opening the door to KKR would be a tacit admission that the company has neither a plan nor a team that can get the shares to that price in the foreseeable future.

The idea behind the transaction is that Telecom Italia’s network infrastructure would be carved out into a separate business, with the state having de facto control even if via a minority stake. The remaining company would house the customer-facing and international operations, obviously a candidate for a further break-up.

Ending Telecom Italia’s vertically integrated model in this way makes a lot of sense. The result would be an unambiguously independent wholesaler of network access, a regulated monopoly serving various competing consumer businesses. In turn, the focused network company would be better placed to get on with wiring up the whole country with ultra-fast broadband. It may feel like a loss of pride to shrink an institution like Telecom Italia, but plenty of shrinkage has already happened.

The question is who manages the transformation and who are the right owners for the individual pieces? Having issued two profit warnings this year and with a CEO halfway out, you can see why the board might be flailing. Nevertheless, it could run an auction for the company’s constituent parts itself.

KKR brings no industrial synergies, and a break-up could be pursued without the firm acting as fixer. Plus, it remains unclear precisely what KKR wants. It’s probably more interested in the core network piece, which would make an attractive holding for an infrastructure fund. Maybe CVC wants a part of that too. If not, the other Telecom Italia businesses would be an ideal candidate for a conventional leveraged buyout.

With the standalone defenses weak, who might push up KKR’s bid price? Not many private equity firms or groups could make an offer for the whole company. Advent International is cooling on the idea of a transaction, Bloomberg News has reported. The role of Vivendi SE, the French media group and lead shareholder with 24%, is becoming increasingly significant. It has already said KKR’s mooted price doesn’t reflect Telecom Italia’s value.

KKR’s indicative offer included a low 51% acceptance condition. With that, it could probably push through a demerger proposal (requiring a two-thirds majority at extraordinary general meeting) even if Vivendi was opposed. But if it thinks Telecom Italia is undervalued, it’s going to want as much of the upside as possible. Moreover, if it wants to borrow a lot to fund a deal, it’s going to need full control. And KKR’s end investors are going to be wary of any situation where it’s in open conflict with billionaire Vivendi boss Vincent Bollore.

Vivendi’s position is strong. If could become a fellow passenger in the breakup plan. At worst, it gets stuck with a large, non-controlling stake in an unlisted company while free-riding on the value that KKR generates. Its power to deprive KKR of outright control is worth something. Plaudits to KKR for offering shareholders a premium and providing a catalyst for radical action. But Telecom Italia minority shareholders look increasingly reliant on Bollore getting the price up.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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