TIM squeezes more cash out of NetCo bidders

TIM has received two new bids for its network assets from the CdP Equity and Macquarie partnership, and from KKR.

The Italian incumbent confirmed receipt of the two new non-binding offers late on Tuesday, the deadline it had set for the interested parties to improve on their previous bids.

It did not explicitly state that the groups had submitted higher offers – in fact it did not provide much information at all, as has become the norm with this process – but clearly that is the case. We’re probably looking at an extra billion or so of euros each – no more.

Earlier this week, Reuters’ sources claimed that both bidders would add €1 billion-€2 billion to their offers. And after the bids had landed, Italian financial publication Il Sole 24 Ore added more detail. It suggests that CDP/Macquarie has raised its offer to €19.3 billion, from its starting point of around €18 billion, while KKR has added about €1 billion to its bid, taking it to €19 billion plus €2 billion in earn-outs in the event of a TIM/Open Fiber network merger.

As the paper notes, TIM’s share price took a hit when the new offers arrived – at the time of writing the telco was trading at €0.30, down from €0.31 – indicating that the market is underwhelmed by the response from the bidders.

Naturally, speculation continues as to Vivendi’s reaction to the new bids. As has been widely reported, the French firm, which remains TIM’s largest shareholder with a 23.75% stake, has slapped a price tag of around €31 billion on NetCo, the working title given to TIM’s fixed-line assets, its FiberCop fibre-to-the-home (FTTH) unit, and international wholesale operator Sparkle. Il Sole 24 Ore says there are rumours Vivendi would consider going as low as €26 billion, but that would doubtless take some serious negotiation, and still leaves a sizeable gap with new bids, presuming the various sources are correct in their valuations.

All of which leaves TIM no further forward in its quest to sell off those fixed assets and thereby cut its debt pile, which stood at €25.4 billion at the end of last year.

We have been talking about the sale of NetCo since last July, when TIM presented its plans for the spin-off of its network assets and highlighted the new unit as a candidate for potential M&A, although of course debate over future of the telco’s fibre assets has been raging for much longer than that.

Private equity firm KKR was the first to bid in February this year, followed by the Macquarie and CDP Equity – whose parent Cassa Depositi e Prestiti (CDP) holds 9.8 percent of TIM, lest we forget – tie-up a month later. TIM quickly made it clear that it wanted more money, without disclosing the value of the bids, and gave the parties until yesterday (18 April) to rethink. Which they duly did, and that’s where we are now.

“The two non-binding offers will be examined by TIM’s Board of Directors at the meeting scheduled for 4 May next, after preliminary investigation by the Related Parties Committee,” it said in response, giving nothing away.

That means we’re in for at least another fortnight of speculation before we hear anything from TIM. While the telco is keeping its counsel in public, but frantically juggling the wants and needs of the various parties involved, itself and the Meloni government with its renationalisation bent included, behind the scenes. There will be a resolution in this process, but it’s anyone’s guess how long it will take and what the final outcome will look like.

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