TIM gets government green light for KKR deal

The approval of the state is a vital step on what has been and continues to be a lengthy road to completing the sale of NetCo. It was never a given that the government would green light the move, but it was unlikely to block it entirely either. The key issue here was any conditions it might seek to impose, given that it views the TIM's network as a strategic national asset.

It has imposed certain conditions. Or, more accurately, it has accepted a series of commitments made by KKR and TIM to protect that strategic asset. But TIM did not disclose what those commitments look like.

"These commitments were deemed by the Government to be fully adequate to guarantee the protection of the strategic interests connected with the assets involved in the transaction," the telco said in a short statement on Wednesday.

Whatever the content of the small print, all parties are clearly happy, and that's a rarity in this tortuous transaction.

It is more than 18 months since TIM outlined plans to split off a group of assets it dubbed NetCo and put it up for sale. A lengthy period of bids and counter-bids occupied its attention for months in summer 2023, with KKR and rival bidder a consortium of Cassa Depositi e Prestiti (CDP) and Macquarie repeatedly upping their non-binding offers. TIM eventually decided to go with KKR, which could have been a risky move from a government approval perspective, given that CDP is state-owned and already a TIM shareholder, but it turned out not to be a major issue.

TIM accepted a binding bid of up to €22 billion from KKR in November, finally bringing some clarity to the situation. But shareholder Vivendi was – predictably – unhappy and launched a legal challenge. It claims TIM contravened governance rules in doing the deal, but that's just its legal argument; its beef is mainly about the money, and partly about the concept of network separation. That challenge is ongoing. TIM said it would press on regardless, and indeed it has.

There is still plenty to do to get the deal over the line, but having got through the Golden Power legislation with the state – that's the law that enables the government to intervene in and potentially block deals that carry strategic national significance – is a major milestone.

TIM and KKR aim to close the network transaction this year, and it's starting to look like they might actually achieve their goal.

Separately, KKR is keen to acquire TIM's subsea cable unit Sparkle, a business that the telco initially grouped with the NetCo assets and later separated out.

KKR has until the end of the month to complete due diligence on Sparkle and submit a binding offer, the TIM board having agreed to extend the deadline late last year.

At the same time, TIM revealed that company chairman Salvatore Rossi will not seek re-election when his mandate expires later this year, and noted that the board has started discussing potential candidates for its future make-up.

So, while the government go-ahead on the KKR sale brings greater certainty to that deal, there are still many outstanding issues to be resolved at TIM.