CDP readies TIM bid but valuation still an issue

With the Italian election now over, Cassa Depositi e Prestiti (CDP) is putting together an offer for TIM’s fixed network assets that will land in the next couple of weeks.

The Italian state lender is essentially trying to figure out what TIM’s network is worth before making a bid that will act as a precursor to the country’s much-discussed single fixed network project, according to a report.

“We are strictly working with our partners to finalize the valuation process of the assets in accordance with the memorandum of understanding entered into on May 29,” CDP said in a statement published by Reuters.

The MoU the bank is referring to was inked by itself, plus TIM and Open Fiber – CDP being a shareholder in both – and investors KKR and Macquarie. The parties pledged to start working towards the merger of TIM’s fibre network assets with the rival infrastructure rolled out by Open Fiber to create a single, high-speed network controlled by CDP Equity, the latter being, as its name suggests, CDP’s private equity arm.

They aimed to sign binding agreements by the end of October, but meeting that self-imposed that deadline is starting to look like a tall order.

Earlier this month Italian financial daily Il Sole 24 Ore cited unnamed sources as saying that CDP would make an offer for the assets in the last week of September; essentially noting that the bank would wait until after the election. Italy went to the polls at the weekend and, as expected, far right party Fratelli d’Italia (or Brothers of Italy) leader Giorgia Meloni came out on top, and will likely be formally asked to form a government next month.

However, Reuters now reports, again leaning on anonymous sources familiar with the matter, that we will have a non-binding bid from CDP in the first half of October.

While the election certainly played its part in pushing back the single network timeline, there also remains a huge question over the valuation of the assets involved, and that is doubtless giving those involved a bigger headache than the political situation.

Indeed, the newswire’s sources added that deliberations over valuation are ongoing, which perhaps suggests that parties are not as close to reaching agreement as they might like.

As we have mentioned a number of times, major TIM shareholder Vivendi is reportedly looking for the network to be valued at €31 billion in order for it to back a sale of the assets. However, CDP is looking at closer to €20 billion, including debt, while there has been talk of €15 billion-€18 billion being a more likely figure.

That’s a pretty broad range, with the lowest figure being less than half of the sum Vivendi is said to be after. It will not be easy for the number-crunchers to make all parties happy.

And even once the valuation question has been answered as satisfactorily as possible – presuming we get to that point, that is – there are other issues that will still have an impact on the creation of this single network, not least of which being the direction taken by Meloni’s government.

Italy’s single network is still proving singularly complex.

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