Italy offers €700 million for TIM's Sparkle

The offer has been a long time coming. The Ministry of Economy and Finance (MEF) made its first formal bid right at the end of January, after months in the pipeline and within minutes of a deadline set by the Italian incumbent for it to do so.

But rather than that bid being the culmination of the takeover process, it was just the start. TIM rejected the bid a week later and asked for more money...and that was the last we heard on the matter until now.

This is the first time TIM has disclosed the size of the state's bid, but based on reports in the Italian press over the past eight months, it looks like it's an improvement on that first offer.

Milano Finanza is one of a number of media outlets to have put a figure of €600 million on the first bid, plus up to €150 million in additional variable elements. There's no mention of variables in TIM's very short statement disclosing the new offer, but it's clear that €700 million valuation is a fixed element.

"TIM announces that it has received from the Ministry of Economy and Finance (MEF) and Retelit, a subsidiary of the Asterion Fund, a non-binding offer for the purchase of Sparkle," the telco's announcement reads.

"The proposal recognizes an enterprise value of €700 million for Sparkle, will be valid until October 15, and will be submitted for examination by TIM's Board of Directors upon completion of preliminary activities preparatory to the evaluation of the offer."

While TIM namechecks Italian B2B services provider Retelit, there's no mention of KKR. We had been led to believe that KKR – which recently closed the acquisition of TIM's NetCo business, as if we could forget – would work with the government on its Sparkle bid, but it's no longer evident that the investor is involved at all.

Doubtless all will become clear in the fullness of time. But we could yet be in for more of a wait. Although this non-binding offer is only valid for the next couple of weeks, which presumably means an unscheduled meeting for TIM's directors, reports in Italy suggest the process could run into next year.

Il Giornale suggests it will take three or four months, pointing out that although TIM's board could well meet next week, that simply begins the process of the parties working together to hammer out a binding offer.

The paper also considered what TIM would do with the money, should it sell Sparkle for €700 million. Naturally debt-reduction is top of the agenda – the telco's debt will stand at €7.5 billion at year-end, presuming the Sparkle sale does not happen by then, it said – but TIM could also look to a payout to shareholders or even new investments that would help drive its growth in the wake of the networks business sale.

While €700 million seems like a good price for Sparkle – its book value is €481 million, Il Giornale notes – this is a small deal compared with the NetCo sale and will have less of an impact on TIM's debt position than earn-outs resulting from that deal. A merger with Open Fiber before the start of 2027 would trigger an earn-out of €2.5 billion, which would make more of a dent in debt.

All in all, it's basically business as usual for TIM; endless waiting for the finer details of major M&A arrangements to be decided.