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US private equity firm KKR has agreed to extend the deadline for TIM to respond to its non-binding proposal by four weeks, giving the government more time to explore its potential ramifications
For most of last year, it looked as if the Italian government’s plan to create a single national broadband network by merging the fixed line assets of TIM and Open Fiber was finally making progress.
In May, formal negotiations between key players finally began, with a Memorandum of Understanding between TIM, Open Fiber, Cassa Depositi e Prestiti (CDP, the government-backed investor in both companies), KKR, and Macquarie Asset Management ending years of stalemate.
The group aimed to reach a binding agreement by October, but these discussions were stalled by differing opinions regarding the valuation of TIM’s fixed line assets.
To make matters worse, the new administration under Giorgia Meloni, which came to power in October, proved much less receptive to the idea of a single network, insisting that any critical infrastructure should be more firmly under government ownership.
As a result, a deal never materialised, leaving the single network plan in limbo once again.
This all changed at the start of this month, however, when KKR presented TIM a non-binding offer to purchase a stake in the company’s fixed-line business.
The offer is predicated on TIM spinning off its fixed line infrastructure into a new business tentatively called NetCo, which includes not only the company’s fixed broadband assets but also its submarine cable unit, Sparkle.
Separating TIM’s network and enterprise assets into separate units in this way is a central tenant of new TIM CEO Pietro Labriola’s plan to revitalise the operator’s finances, offering greater opportunities for outside investment.
The financial details of KKR’s offer have not been formally announced, but sources suggest the deal would take a controlling stake in NetCo, potentially valuing the business at over €20 billion. They also suggest the move would leave a roughly 30% stake free for a government-backed investor, which could also have some vetting powers over strategic issues.
TIM has been firmly in KKR’s sights for many years now, with the operator’s relatively flat financial performance leading to a share price many suggested undervalued its infrastructure assets.
Indeed, KKR’s first investment in the business came back in 2020, when the firm agreed to purchase a 37.5% stake in TIM’s newly spun-off ‘last mile’ network, Fibercop. Next year, this was followed by a full takeover offer, with KKR presenting TIM with a bid of €10.8 billion. This bid was ultimately rejected by TIM’s key stakeholder Vivendi, who deemed the bid too low.
Now, this latest bid for NetCo could see KKR finally get its hands on the invaluable Italian infrastructure it has so long pined for. However, the offer will seemingly not go unanswered by other suitors for the infrastructure unit, with Italian media suggesting earlier this month that the CDP is partnering with Macquarie for a counter bid of its own.
According to reports, the CDP would fund 60% of the bid, with Macquarie the remaining 40%.
Almost two weeks later, however, and this counteroffer has failed to materialise at the supposed deadline, a fact that saw TIM’s share price dip by 3% over the weekend.
However, the CDP may yet have a chance to present their case, with KKR announcing today that they have extended the deadline for TIM to respond to their offer by a further four weeks, following a government request.
According to TIM, the request is to give the government more time to analyse the “public aspects” of the proposed deal.
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