Bid target Telecom Italia's auditors meet before key board meeting -sources

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Italy’s former telecoms monopoly has received a 10.8 billion euro ($12 billion) buyout approach from U.S. private equity group KKR in the middle of a boardroom row between CEO Luigi Gubitosi and TIM’s top investor Vivendi (OTC:VIVHY).

Vivendi is pushing for change at the helm of TIM after two profit warnings since July, partly due to a costly deal with sport streaming service DAZN to screen Italy’s top soccer matches, which failed to boost its revenue.

Auditors will examine TIM’s earnings and discuss whether a third profit warning may be necessary as a result of the DAZN rights deal, Italian newspapers reported.

A third downgrade to TIM’s outlook would further strengthen Vivendi’s hand in seeking a change of CEO.

Gubitosi has close ties with KKR, which last year bought a 37.5% stake in Telecom Italia’s last-mile grid and is seeking to preserve its investment.

Any management reshuffle could complicate KKR plans to pursue its offer, which is conditional on the support of the board and the government’s approval.

Rome, which is TIM’s second largest investor through state-lender CDP, has special anti-takeover powers to shield companies it deems as strategic from foreign bids. So far CDP has opposed any major management changes at TIM, sources have said.

TIM shares were down 5% to 0.4723 euros at 1335 GMT.

($1 = 0.8913 euros)