Italian government bids for TIM's Sparkle

The telco made an announcement late on Wednesday noting the arrival of the government's offer, just minutes before the expiry of the deadline it agreed with KKR to complete due diligence and come up with a binding bid.

Cue much excitement from a number of media outlets claiming that the state had come in with a rival offer for Sparkle. However, although KKR is not mentioned in TIM's statement, it has been working with the MEF on the bid all along; this is the one offer we have been waiting for for the past few months.

The offer may have landed, but the way forward is still not clear. In addition to making a financial bid of an undisclosed size, the government is allowing TIM to keep its options open.

"The offer also refers to the possibility of negotiating a different option, with possible adjustments to the contractual terms, in the event TIM retains a minority stake for a certain period of time and supports the implementation of the strategic plan," the telco said.

Clear as mud. However, it essentially means that TIM could hang on to a stake in Sparkle for now, presumably with the option to sell out to the MEF at a later date. For now though, the MEF's offer is for 100% of Sparkle, it confirmed in a very brief statement.

There will be plenty to discuss when TIM's board meets next Wednesday to review the offer. That board meeting was already scheduled, incidentally, so TIM's directors can discuss the composition of the board going forward; there's a proposal afoot to reduce the number of board members at the telco, and it will also need a new chair, Salvatore Rossi having recently indicated that he will not seek re-election.

The MEF's offer for Sparkle will be added to the agenda of that meeting, but it's possible the board will not reach a decision. As Il Sole 24 Ore points out, another board meeting is slated for 14 February to approve the telco's preliminary financial figures for last year, so the discussion on Sparkle could spill over into that gathering. The MEF's offer is valid for 15 days, TIM noted.

Whenever the discussions take place, TIM's directors will have plenty to weigh up. Neither the telco nor the MEF shared any information as to the content of the bid, but there has of course been lots of speculation.

TIM reportedly rejected an offer for Sparkle worth €750 million in November, having itself valued the business at north of €1 billion. Milano Finanza's sources suggest the new bid has added around €100 million to the price, taking the two parties closer to a middle ground. However, Il Sole 24 Ore claims the new bid has come in at that same €750 million level, the deal having been sweetened by the inclusion of the clause that would allow TIM to retain a stake.

We will find out eventually. After all, this wouldn't be a TIM story without a lack of clarity and a big dose of speculation.