TIM takeover talk sends shares skywards

The Italian incumbent's stock price hit €0.29, a price it has not seen since the start of the year, after Bloomberg claimed CVC Capital Partners has been holding talks with Vivendi that could lead to the acquisition of its 24% stake.

Should the deal come to fruition – and we have the usual caveats around talks being at an early stage and so forth – CVC would take over from Vivendi as TIM's largest shareholder and would put itself in a position to launch a full takeover. The newswire's report floats this as a possibility, although the implication is that such a move would be eventual rather than imminent.

Naturally though, a private equity takeover would then lead to discussions around the break-up of the telecoms group, which has a high-growth Brazilian unit as well as its domestic arm.

It's a whole lot more turmoil for TIM, which is still in the process of reinventing itself as a services company following the sale of its networks business in July and is working on the divestment of subsea cables unit Sparkle.

On the subject of Sparkle, there are yet more delays in the process. The Italian government was due to submit a binding bid for the operator by Monday, having requested a deadline extension at the end of November. But it failed to meet its new target. TIM late last week disclosed that the Ministry of Economy and Finance (MEF) and partner Retelit now need until 18 December to present their offer.

"[TIM is] is waiting for the aforementioned offer to start the relevant evaluation and decision-making process," it said.

We were not wrong when we suggested it would be foolhardy to speculate on a date for the Sparkle sale.

While the possibility of private equity takeover of TIM may have found favour with the market, it would doubtless raise more than a few eyebrows in certain circles in Italy. But it is starting to look like a feasible outcome, in no small part because CVC Capital is not the only interested party.

Bain Capital and Apax Partners have also expressed interest in taking a stake in TIM, Finanza Online reports, citing Il Messaggero and Il Sole 24 Ore respectively.

All would-be buyers will have to pass muster with the Italian government, which holds a right of veto, or golden power, as it is known, when it comes to the national telco. While that might not necessarily stop Vivendi selling out to a foreign investor – it is, after all, a foreign player itself – it could reign in the ambitions of any new owner.

There's also the matter of TIM's tax dispute with the government and the potential earn-outs from the NetCo sale to KKR to take into consideration, Finanza Online points out. Both could make it difficult for a potential buyer to come up with a sensible price for Vivendi's stake – Bloomberg puts it at around €1 billion – which could mean that even if there is a deal in the offing, it will likely drag on for some time.

But where the Italian telecoms market is concerned, we're certainly used to that.