Abu Dhabi fund joins KKR in TIM network acquisition

TIM has signed the deal that will see KKR pick up its network assets next year, noting in the process that a major Emirati sovereign wealth fund will also be a part of the transaction.

The Italian incumbent revealed that it has signed the transaction agreement relating to NetCo – as announced over the weekend – with KKR’s Optics BidCo and the Abu Dhabi Investment Authority’s (ADIA’s) Azure Vista subsidiary. The deal covers the transfer of TIM’s primary network and wholesale assets, and its Telenergia equity, into FiberCop and the subsequent acquisition of FiberCop by Optics BidCo.

The mechanics of the deal we already knew, but the addition of ADIA as an additional investor is new information.

It’s not altogether surprising. ADIA already invests in FiberCop, having been green lighted by the Italian government to do so, and there have been many rumours of its participation in the NetCo sale. We also knew that the inclusion of other investors in the project alongside KKR was a distinct possibility.

We don’t know what the extent of ADIA’s position in NetCo will be. The fund is not in the habit of sharing much information about its assets. We do know that it’s the world’s fourth biggest sovereign wealth fund, according to Sovereign Wealth Fund Institute (SWFI) rankings, and that it has increased infrastructure investments in recent years.

Its involvement in the NetCo deal really doesn’t change anything, but it is an interesting snippet of information.

For the most part, TIM reiterated the information it shared at the weekend with regard to the expected progress of the KKR deal – the fact that it is shooting for a summer 2024 completion date subject to regulatory approvals, and so forth. But it also added a terse comment clearly aimed at the opponents of the NetCo sale plan, mainly, but not exclusively, Vivendi.

“With regard to the information and statements circulated in the last few days and their correctness, the Company does not deem it appropriate to comment on the press, reserving the right to do so in the appropriate venues, also in light of their effects on the performance of stock market prices,” it said.

Vivendi was quick off the mark in publishing a statement expressing its objection to the KKR deal on Sunday. While it is pretty clear that the French firm and TIM shareholder is opposed to the transaction in the broadest sense, it has a number of specific arguments against it, chief among which is that it claims the deal should have been put to shareholders. As such, Vivendi plans to take legal action. And it might not be the only one.

Merlyn Partners, a fund that represents a small percentages of TIM shareholders, published a statement of its own on Sunday, also attacking the KKR deal. The fund is the principle player in the TIMValue endeavour, which recently presented an alternative strategic plan for TIM that centred around the retention of the network assets and sale of the telco’s retail and Brazilian operations.

Merlyn has myriad objections to the transaction, including its price, the fact that it does not address the employment question, and that there was no consultation with shareholders.

The fund reserves “the right to to take any action that leads the board of directors to call a shareholder meeting as soon as possible,” it said in an Italian language statement. Such a meeting would enable shareholders to confirm whether the transaction is what they want for the telco, or whether they would prefer “a different and, in our opinion, better future,” it said.

Merlyn and Vivendi seem to be on the same side of the argument. And doubtless there are others. It appears TIM will continue to face plenty of opposition to this deal going forwards, regardless of the fact that it has now signed on the dotted line. But for now, it’s keeping quiet about it.

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