The deal, the brainchild of CEO Pietro Labriola, will see the company almost halve its debt pile
On Sunday, Telecom Italia (TIM) approved the sale of its fixed-line network to US-based equity firm KKR for €18.8 billion. The fixed-line business will be spun into a new entity named NetCo.
TIM’s board of directors met from 3–5th November to examine the binding offer that was submitted by KKR back in October. Eleven of the board’s fourteen members approved the acquisition.
At the same time, TIM’s board rejected a non-binding offer from KKR for Sparkle, the company’s subsea cable unit. The board considered the offer to be unsatisfactory, noting that KKR had the possibility of presenting a higher offer until5th December, when the offer expires.
The sale of NetCo will reportedly allow TIM to reduce its debt pile of over €26 billion by €14 billion, theoretically giving TIM the financial flexibility it needs to compete in the market effectively.
The deal is backed by the Italian government, which secured the right to take a stake of up to 20% in NetCo for €2.2 billion earlier this year. The government views TIM’s networks as = critical national infrastructure and view the deal as a stepping stone to creating a single national fibre network via a merger of NetCo with fibre rival OpenFiber.
However, French media giant Vivendi, who are TIM’s largest shareholder with a 23.75% share of the firm, remain displeased with KKR’s offer, arguing that TIM’s assets are worth around €30 billion and are therefore being undervalued. The firm also claims that TIM failed to request a shareholder vote on the decision, which they say is a breach of applicable governance rules.
In a press release, Vivendi said it would “use all legal means at its disposal” to refute TIM’s “illegal” decision. The firm had previously threatened to launch legal action if the KKR offer was approved without being submitted to a meeting of shareholders, where Vivendi have significance influence as the largest shareholder.
“The rights of Telecom Italia shareholders are being trampled on,” Vivendi said.
The deal is expected to close in summer next year.
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