TIM again asks for more cash for networks unit

TIM is still not happy with the offers it has received for its network assets and has again asked the bidders to up their offers.

But while it seems that at least one of them will be willing to do so, any new offer could still be some way off the sum major shareholder Vivendi is looking for.

The Italian incumbent’s board of directors met on Thursday to discuss the two offers on the table for NetCo, one from a consortium of CdP Equity and Macquarie Infrastructure and Real Assets (Europe), and the other from KKR, and “deemed them not yet adequate,” TIM revealed late in the evening.

“Therefore, in light of the readiness expressed by at least one of the bidders to improve its non-binding offer, the Board decided to explore this readiness with the perspective of obtaining a final offer by 9 June,” TIM said, in one of its by now trademark perfunctory statements on the matter.

We still don’t officially know who has offered what for the assets – which comprise TIM’s fixed-line assets, its FiberCop fibre-to-the-home (FTTH) unit, and international wholesale operator Sparkle – nor is it clear which group has indicated to the telco that it would be willing to go higher. However, as it stands, CDP/Macquarie is believed to be the lower bidder.

When both parties raised their offers at TIM’s behest last month, Italian financial daily Il Sole 24 Ore reported that CDP/Macquarie had upped its bid to €19.3 billion, from its starting point of around €18 billion, while KKR had added about €1 billion to its offer, taking it to €19 billion plus €2 billion in earn-outs in the event of a TIM/Open Fiber network merger.

That still left both bidders some way short of the €31 billion Vivendi is reportedly looking for, hence it comes as no surprise at all that TIM’s directors have thrown out the new offers. Speculation has continued to swirl in the past couple of weeks that Vivendi, which owns 23.75% of TIM, might drop its expectations as low as €26 billion – indeed, CorCom said as much when it reported on the latest plume of black smoke from the TIM chimney on Thursday night – but that still leaves a sizeable gap in valuation, and one that will not be easily overcome.

There’s a strong sense of déjà vu here. We have yet another deadline from TIM, this one another month away, during which time industry watchers will continue to comment on Vivendi’s price intransigence and speculate on whether the French firm can be swayed. The difference this time around is that it seems unlikely that TIM will give the bidders yet another chance to throw in a few more euros. This must surely be best and final offers.

That’s not to say, of course, that we are now approaching resolution in this long-running network sell-off saga; by the time the new deadline rolls around it will have been nearly a year since TIM formally presented NetCo as an asset for potential M&A. It’s anyone’s guess what will happen next if at least one of the bidders does not come up with an offer that the board deems adequate. But TIM cannot simply keep passing the hat around.

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