TIM’s board of directors has approved the sale of the network to the US fund KKR for 22 billion euros. According to rumors, the decision – one of the most important in the history of the telecommunications company – was taken by the board by majority, and not unanimously, with 11 directors voting in favor and three against. It is therefore not expected that the operation will pass through the shareholders’ meeting, as requested by Tim’s first shareholder, the French group Vivendi, which defined the decision as “illegitimate” and said it was ready to use “every legal instrument to its disposal to contest this decision and protect its rights and those of all shareholders”. Acting not only towards the company but also towards the directors who approved the transfer.
The structure of the deal
The green light from the board comes at the end of months of negotiations. Kkr’s offer, presented through the vehicle Optics BidCo, values the Tim network, excluding Sparkle, at around 19 billion, a sum to which around three billion could be added in the future if certain conditions are met, including the merger with Open Fiber competitor. In addition to the American fund, the new infrastructure company, Netco, will have the Ministry of Finance as shareholders, with a share of around 20%, and the Italian fund F2i. The operation will allow Tim to reduce its debt by over 30 billion and reduce the number of employees. In fact, almost 20 thousand employees will move to Netco, while the debt cut for Tim will be in the order of 14 billion. «I say to all our shareholders that we are giving Tim back the possibility of looking to a sustainable future and of being ready to seize the opportunities it will have before it», underlined the CEO, Pietro Labriola. «Our objective is to continue on this path traced by the plan approved with the support of our main shareholders, always remaining open to dialogue and to the proposals submitted to us, in particular, by the most important shareholders».
The new Tim
The completion of the transaction is expected in the summer of 2024, once authorization has been obtained from the Antitrust authorities, the EU regarding distortive foreign subsidies and the government according to the Golden Power legislation. Once the operation is closed, the new TIM without a network will have a net debt to ebitda ratio of less than two times. Tim and the new network company will also stipulate a “rental” agreement which will regulate the terms and conditions of Tim’s access to the infrastructure. «The transfer of the network to an infrastructure investor like KKR has also found the appreciation of the Government, which will support this operation with huge resources; it restores growth prospects to the Tim group”, recalled the president of Tim, Salvatore Rossi. «The new Tim of services, freer from financial burdens and stronger on the market, will be able to make its contribution to developing that capacity for innovation which is fundamental to accompanying families, businesses and public administration towards a totally digital future»
Vivendi’s reaction
The operation was opposed from the beginning by Tim’s first shareholder, Vivendi, who had requested the calling of a meeting to give the green light to the sale. This was not the case because, on the basis of some legal opinions, the majority of the board of directors considered that the transfer of the network does not change Tim’s corporate purpose. Hence the approval without going through the assembly. Vivendi’s response was not long in coming, as in some letters in recent days it had feared court appeals not only to block the deal but also against the directors. “The rights of Tim’s shareholders have been violated,” the French group thundered in a statement. Tim’s board of directors has deprived each shareholder of the right to express their opinion at the meeting, as well as the related right of withdrawal for dissenting shareholders.” A passage that suggests that Vivendi may request in court, among other things, that it be allowed to exercise the right of withdrawal, i.e. to exit the company’s capital, seeing its shareholding liquidated.
The protests of the Merlyn fund
The activist fund Merlyn also joined the protest, having proposed an alternative plan a few days ago and, in fact, opposite to the one approved by the board of directors: keeping the network and business services under Tim, selling everything else. The board took note of the project but did not consider it in line with the group’s strategic plan. “The decision of TIM’s board of directors to approve KKR’s offer without submitting the decision to a vote of the shareholders’ meeting is disrespectful and wrong,” Merlyn wrote in a note. «Adopting a resolution of such importance for the fate of the company, even if not unanimously as previously announced, without listening to all the shareholders, constitutes a lack of respect for the market and the most basic principles of good corporate governance». The fund therefore reserves the right to “proceed with any possible action that leads the board of directors to call a shareholders’ meeting as soon as possible”. Who knows, in this effort he might find an alliance with Vivendi, who Merlyn himself had asked for a meeting in recent days.
Financial advisors
The operation called together all the investment banks and financial advisors involved on one side or the other of the transaction. Goldman Sachs, Mediobanca and Vitale & Co assisted Tim, Equita and Lion Tree, the independent directors of the company. UBS was advisor to the Ministry of Finance. KKR had JP Morgan and Morgan Stanley as consultants.
2023-11-05 20:26:15
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