The Italian incumbent is set to enter exclusive negotiations with KKR over sale of its network assets, with private equity firm outbidding rivals CDP & Macquarie
The operator’s board gave the green light for CEO Pietro Labriola to begin exclusive negotiations with US investment fund KKR last Thursday, regarding the sale of the telco’s fixed line networks business , which is to be spun off into a new entity dubbed NetCo. KKR, who hold a stake in TIM’s last-mile operator FiberCop, have been given until September 30 to submit a binding offer. KKR’s earlier non-binding bid for €23bn was accepted ahead of the rival bid from CDP and Macquarie.
While this would seem to draw the protracted sale one step closer to completion, the bid is still subject to both regulatory and governmental approval, while shareholder Vivendi, who hold a 23.75% stake in TIM, plans to block the move due to the offer ‘undervaluing assets’ in reports published in the Financial Times. The French conglomerate have previously valued TIM’s assets at €31bn, and while reports in Italy have suggested that this could drop to €26bn, this is still higher than the non-binding bid previously submitted by KKR.
While Vivendi’s opposition is a significant block to the deal, TIM has noted that any transaction involving NetCo remains subject to regulatory approval and also the government’s ‘Golden Power’ authority, which allows it to have a say on the fate of assets considered to be of strategic national importance as well as antitrust approvals. TIM’s description of KKR’s bid as being “preferable in terms of executability and timing,” suggests some confidence in getting the deal through the regulatory process. However, as Vivendi’s reaction shows, we still have some way to go before we can describe the NetCo sale as completed.