Telecom Italia’s (TIM) board of directors yesterday voted by a majority to accept the US infrastructure fund’s bid
The French media conglomerate, Vivendi, has said it will use any legal means at its disposal to stop KKR gaining control of Telecom Italia’s fixed network infrastructure. KKR’s latest bid for up to €23 billion is binding was submitted last month.
Vivendi is Telecom Italia (TIM)’s single biggest shareholder with a stake of just under 24% and 17% of the voting rights. Vivendi has also long argued that KKR’s various bids, including the latest, is too low and that a fairer value would be €30 billion.
Note that negotiations for the international, subsea infrastructure, which operates under the Sparkle brand, are ongoing.
KRR has been involved in various negotiations with Telecom Italia for about two years. Initially it offered €33 billion to gain control of the entire operator and delist it. This proposal was rejected by the then government and contributed to the previous CEO, Luigi Gubitosi, being ejected from the board to be replaced by Pietro Labriola, whose appointment had Vivendi’s support.
KKR bid approved by the board
On Sunday, TIM’s Italia’s board of directors approved KKR’s most recent bid for the NetCo in a majority vote. The board, led by Labriola, insists the board has the right to make the decision and that the CEO has the authority to sign the necessary contracts.
Labriola said in a statement, “Two years of hard work with our heads down wrap up with a historic decision which will see the creation of two separate companies with entirely new development perspectives.”
The deal has the backing of Italy’s right-wing government, which will invest more than €2 billion to secure a 20% stake in the NetCo as it is a strategic asset of national importance.
One of the major drivers behind spinning off the NetCo is to reduce TIM’s debt mountain which stands at €26 billion. Should the KKR deal go through for the domestic infrastructure and be finalised in summer 2024 as intended, the debt will still stand at €14 billion.
TIM’s board argues that the transaction will also result in less stringent regulation in its domestic market, which will boost growth.
Vivendi said today that it “deeply regrets” the board accepting the offer without putting it to a vote by shareholder and that it intends to use any legal means available to it to block the transaction.
Other solutions?
Last week a group of shareholders that collectively hold less than a 3% stake also protested against the deal and demanded that shareholders should be allowed to vote on the matter.
They are represented by Merlyn Advisors and RN Capital Advisor which sent a letter to the board directors proposing a different solution for raising capital and paying off debt: that Telecom Italia should sell its Brazilian operations and assets, and retain its domestic infrastructure which should remain integrated with its retail operations.
Whether they too will pursue a legal remedy remains to be seen.
Bruising
Vivendi’s involvement with Telecom Italia has been a bruising. The French firm has invested €4 billion for its stake in the Italian operator over eight years. During that time has had to write down the value of its investments as Telecom Italia’s shares have fallen, debt and competition have risen, and the board room has been beset by conflict and a succession of new management and strategies.