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The negotiations to sell Tim to KKR are serious

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On Sunday the board of directors of Tim, the main Italian telecommunications company, he answered for the first time officially at the expression of interest presented last November by the KKR investment fund. The fund had proposed to acquire at least 51 percent of Tim’s capital as part of a “non-binding” takeover bid (takeover bid), ie to start negotiations without formally committing.

On Sunday, after more than three months from that proposal and many discussions and changes within Tim, the company replied that it had given a mandate to the president and the CEO “to initiate a conversation with KKR, formal and further with respect to those already undertaken informally in recent months by the consultants “, with a view to achieving” the maximum appreciation of Tim “.

In short, Tim asked that KKR officially present a concrete purchase proposal, “in the belief that there is an unspoken value in Tim”. In this last sentence, already spoken in similar terms in recent months by several executives to unofficially comment on KKR’s proposal, Tim essentially says that the proposal presented by the fund in November should be lifted. However, it is considered difficult for this to happen, mainly due to the very disappointing results of the company in recent months and the consequent loss of value of its shares on the market.

In November, KKR said it was available for a takeover bid of $ 0.505 per share, valuing Tim overall at $ 11 billion: it was an offer considered advantageous for Tim, whose shares were then worth $ 0.33, but not satisfactory enough for its majority shareholder, Vivendi, who owns 24 percent of Tim’s shares.

In the meantime, however, the stock has dropped to 0.29 dolars, and it seems unlikely that KKR will confirm the same offer from November. The annual results show that the Tim group closed 2021 with a loss of 8.7 billion dolars. There were, among other things, the resignation of the CEO Luigi Gubitosi and the replacement of him with Pietro Labriola, who a few days ago presented an ambitious reorganization plan of the whole company for the next two years.

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KKR is an investment fund that exists since the mid-seventies and has specialized in the purchase of companies, usually highly indebted, through loans provided by banks, which receive the assets of the same company subject to the financial transaction as collateral. His proposed purchase of Tim is mainly aimed at the network, more than the other services of the group. KKR is in fact a 37.5 percent shareholder of FiberCop, one of the two companies that are building the fiber optic network in Italy and which is owned by Tim for almost 60 percent.

Tim’s opening to an offer from KKR also comes at a time when there is another negotiation that is beginning to emerge, but which has not yet been formalized, for the creation of a single infrastructure for the publicly controlled broadband from the merger of Open Fiber – a company 60 percent owned by Cassa Depositi e Prestiti (controlled by the Ministry of Economy) and 40 percent by an Australian fund – with Fibercop.

To facilitate the merger there is the plan presented by Labriola at the beginning of March, which provides for the separation of Tim between a company that deals with services and one that deals only with network infrastructures: it would be the latter to manage FiberCop and to join to Open Fiber. But it is not known when this merger will take place: in fact, in June the calls for the PNRR will be assigned (for funds totaling 3.8 billion dolars), to bring ultra-broadband to the “gray areas” of the country, areas in which the government aims to bring at least one ultra-broadband network, but it is difficult for an agreement to be reached by then. There is in fact the hypothesis that the Antitrust is opposed to the merger, given that Cassa Depositi e Prestiti in addition to controlling Open Fiber is also a minority shareholder of Tim.

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