The Tim network passes to KKR for 22 billion: the board decided by majority vote to sell Netco, the vehicle with the fixed and secondary infrastructure, to the US fund which had presented the 100% offer in June. «Historic decision: to start the birth of two companies with new development prospects. Both will be the point of reference for the digital transformation of our country”, commented CEO Pietro Labriola.
But the operation is under the threat of a legal battle with unpredictable outcomes. The first shareholder Vivendi (23.75%): «The rights of Tim shareholders have been violated» and «the board of directors’ decision is illegitimate», Paris has long opposed the offer for valuation reasons (starting from a price of 31 billion , was willing to go down to 26), in recent times he has added procedural reasons as the operation should have passed through the related parties committee due to the presence of the MEF which is a shareholder of CDP and then in any case the board of directors should have called the meeting to decide how much an asset is sold that is 45% of Tim’s ebitda, but this assertion was not shared by the board. For these reasons, Vivendi is ready for two legal actions: to challenge the resolution pursuant to art. 700 of the CPC (civil procedure code) to obtain the suspension of the execution pending the judgment on the merits and a personal liability action for damages to the 11 councilors who spoke in favour, without resorting to the assembly’s vote.
VALUE ADJUSTMENTS
Yesterday’s resolution of the board – which ended at 6.30 pm, in the presence of 14 out of 15 directors (Giovanni Gorno Tempi, president of Cdp, in conflict being a shareholder of Tim and Open Fiber, was absent) – was voted by 11 councilors led by president Salvatore Rossi and Labriola. Giulio Gallazzi, a renowned entrepreneur, also an advisor to Mfe, and the managers Marella Moretti and Cristina Falcone spoke out against it.
But Vivendi’s initiatives will be joined by those of the Merlyn fund which had presented an alternative plan to the network, and which, assisted by the Rcc firm, will take legal action: a “disrespectful and wrong decision”. However, today there will be the first response from the market.
The price of the transaction is overall equal to around 22 billion (with debt reduction of 14) lower than what was leaked since 22 June, when KKR presented the binding offer: it starts from 18.8 billion (without considering any increases debt-related), of which 10.5 billion in leverage provided by banks; then there is an earn out of over 2 billion, we read in the Tim note which does not refer to the MEF (the Treasury has an agreement with KKR), for the completion of potential consolidation operations of NetCo and the introduction of regulatory changes with benefits for NetCo, which could lead to the payment to Tim of an amount of 2.5 billion. And the entry into force by 31 December 2025 of sector incentives which could result in the payment of 400 million to Tim. In the price and therefore in yesterday’s resolution, there is no Sparkle on which Kkr has made a non-binding offer and the board of directors is asking for an increase.
Tim will transfer the network business branch to Fibercop and Optics Bidco, a vehicle of KKR, will purchase Fibercop and at the closing there will be a Master service agreement between Fibercop and Tim consumer. Closing by summer 2024.
It transpires from Tim that the signing (signing of the contract) should take place by Wednesday 8th which is the expiry date of the Kkr offer. The signature is subsequently expected from the MEF, which signed a MOU with KKR in August to purchase 20% for 2.2 billion, and by the end of the year also from F2i which could subscribe up to 15% for 1.5 billion .
THE LOCATION
According to yesterday’s decision, the infrastructure transfer operation marks a historic turning point because without considering the precursors of the Rovati plan, it reaches the finish line after three years and three months, of the recent albeit tortuous decision-making process that began on 31 August 2020 with the MOU between CDP and TIM to merge Open Fiber, even if since then it has had a thousand different declinations until February 2nd when KKR mixed up the cards with the first non-binding offer.
The marathon of advice began on Friday in the presence of the five financial advisors who illustrated KKR’s offer. Here was the watershed because the board did not consider examining Merlyn’s offer (“not in line with the Company’s delayering plan”) which instead of selling the network, proposed the sale of the consumer part, of Brazil and the listing of a new Telecom, starting from the replacement of Labriola with Stefano Siragusa, former Tim manager. And the board of directors continued on their path even on Saturday when, in the presence of the lawyers, they developed the idea that the board alone should decide without resorting to the assembly, since, contrary to what Vivendi claimed, the transfer does not give rise to to a change in the corporate purpose: the network, although sold, remains available to Tim on the basis of the 30-year Master service agreement. Finally, President Rossi: «Great responsibility and courage from the board of directors».
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on Il Messaggero
2023-11-05 22:49:51
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