Does Tim, Cassa Depositi e Prestiti, have the money to launch a takeover bid on its own?
Tim on the stock market. The plans of the Meloni government. Labriola's words. The three hypotheses of Opa. The question of the resources of CDP (Cassa Depositi e Prestiti), and the issue of banking foundations. Facts, numbers and insights
Tim still at the center of the intertwining of industry, finance, politics and takeover bid voices. Here are the latest news.
Tim sparkling on the stock market (yesterday it closed with a jump of 10.65% to exceed 24 euro cents) due to the renewed rumors on the hypothesis of a takeover by Cdp, with or without some funds, while reports are getting hot among the major shareholders of Tim (Vivendi and Cdp, first of all) not only on the evaluation of the network asset but also on the role of Vivendi's French consultant, Andrea Pezzi, in the choices and relations with Tim, given what he unveiled yesterday Report : the former TV presenter Pezzi as well as Vivendi's consultant had commercial relations with the Tim group on online advertising for “millionaire contracts with the telephone company”, according to an investigation by the Rai program. While in Tim's next board of directors there will be dossiers that have been examined by the board of statutory auditors on the contract between Tim and Dazn .
HOW THE VOICES OF OPA ON TIM ARE BORN
But what's really going on for Piazza Affari on Tim? According to Il Sole 24 ore di Oggi, there are three working hypotheses: "The first, which has already begun, is the result of an MoU and which has a deadline of 30 November when Cdp will be called upon to make a non-binding offer for Netco Tim (network plus Sparkle). According to the time schedule envisaged by the memorandum of understanding signed at the end of May by Cdp, Tim, Open Fiber, Kkr and Macquarie, at this stage we should have already been towards the definition of the binding offer. And instead the project, with all its diatribe on the difference in valuations between Cdp as a buyer (willing to reach 15 billion) and Vivendi as a seller (with his request for 31 billion), would seem to have to give way, unless there are surprises ".
THE THREE HYPOTHESES ABOUT TIM
The second working hypothesis lies in the “Minerva” plan born within the Fratelli d'Italia and which has Alessio Butti, its creator, in the under-secretary at Palazzo Chigi with powers of digital innovation, as repeated by journalistic reconstructions. At the base of the plan, according to market rumors that have re-emerged since last August, there is a Cdp takeover bid on the entire Tim. “Finally – added the Sun – there is another plan that in some way represents a variation to the theme: a takeover bid launched by Cdp, but together with Kkr, Macquarie and Vivendi. Three different scores but which arrive at the same result: a “state” network. And, after all, this is the only indication arrived from Prime Minister Giorgia Meloni ”.
Last weekend Butti said: "The Minerva project" of a single publicly controlled telecommunications network, developed by the Brothers of Italy, "is a priority" and "I will begin to hear all the stakeholders starting from the CDP". According to the Undersecretary to the Presidency of the Council with responsibility for Innovation, “Cassa, which is the emanation of the Mef, has a double role which is strange, both within Tim and within Open Fiber. We will start talking to Cassa and then to Tim and the other operators. It is essential to start on the right foot ". "In recent months we have managed to bring the mainstream to our positions," he explained.
THE ROLE OF TIM BRASIL
According to Il Sole 24 ore , the Minerva plan would point to a partial takeover bid: "For which, obviously, the problem of debt consolidation by CDP would remain, but this would be circumvented by the sale – which should even be preventive – of Tim Brasil and the services part. Then the entry of Open Fiber (60% controlled by Cdp and 40% by Macquarie) would follow ”. The Brazilian subsidiary today presented the accounts for the third quarter, the first in which the acquisition of the mobile activities of the OI group is accounted for for the entire period, with revenues from services up by 24.7% and Ebitda up by 24. , 5%. "In the third quarter of 2022 Tim Brasil presents solid results, showing a high level of execution results and confirming its ability to achieve the guidance by presenting", comments the management of the company, led by the CEO Alberto Griselli, who succeeded Pietro Labriola when the latter was appointed to the top of the parent company To support the company's race also the infrastructural development: Tim Brasil launched its 5G service in all the capitals of the Brazilian states and, as evidenced by the note accompanying the accounts, has "More 5G sites than the sum of its competitors".
LABRIOLA'S WORDS ON THE NET AND NOT ONLY
Tim is an "industrially sound company" which, however, suffers from "the burden of debt". This was said by the group's managing director, Pietro Labriola, during the assembly of Confindustria Bari and BAT. “We must structurally solve the debt problem”, added Labriola, indicating in the plan presented last July the best way to achieve this goal. Labriola also focused on the results recorded by Tim Brasil, which in the third quarter saw revenues and Ebitda rise by almost 25%: “it is the flagship of the group”.
Achieving a single fiber network "is an important, strategic element for the country", added Labriola. “Making two fiber optic networks is a useless waste at a time when the country has to develop many other platforms and this must be done in an industrial policy logic, with a certain vision”, added the manager. “No one is building a motorway parallel to the A14,” Labriola exemplified with a metaphor. “The stakeholders on this front are numerous, we have extended the memorandum with Cdp to complete the analysis”, continued the head of the Tum group. "There is a fear that if you lose a lot of time, the overlap in the construction of the networks will be such that in the end it renders everything useless: however, beware that in the next two years it is very likely that both companies that manage the networks will concentrate on construction in the so-called Pnrr areas, so I believe it is probable that the risk of losing synergies from overlapping occurs starting from 2025-2026. Let's try to clear the field of misunderstandings about the risk that it is too late to proceed ”, concluded Labriola.
THE MINERVA PLAN AND THE OPA ON TIM
Opa's perfume on Tim already in August excited Piazza Affari: a takeover bid on Tim – or in any case a coordinated purchase by Cassa Depositi e Prestiti – to then sell almost everything except the network, which would remain in public hands, it is essentially the project (not denied) of the Brothers of Italy once the center-right were to go to the government, according to Bloomberg's reconstruction signed in early August by three journalists from the press agency.
According to the leaders of the Brothers of Italy, it is not the first time that CDP has moved on strategic assets: even on the Aspi dossier (bought by CDP), the policy turned to the Cassa to unravel a controversial dossier and return the concessionaire to the State motorway, but in that case – according to some technicians who followed the game – a beauty contest was organized at least in the first phase .
CONTROVERSE ISSUES
A controversial issue for Aspi, however, as the jurist Vitalba Azzollini underlined in the newspaper Domani directed by Stefano Feltri in recent days: “A sentence by the Lazio TAR risks affecting Aspi's continued management of the motorway network. The concession even risks being revoked due to the intervention, invoked by the TAR, of the European Court of Justice. Right now that it is no longer owned by Benettons but by Cassa Depositi e Prestiti. – wrote the lawyer – The modification of the original agreement and the corporate reorganization of Aspi, with the entry into the shareholding structure of Cassa Depositi e Prestiti, would have required to evaluate the use of a public tender procedure, i.e. a tender for the reassignment of the concession. But there is no trace of this evaluation ”.
THE STACKS OF THE EUROPEAN COMMISSION
Also and above all the CDP takeover bid on Tim would incur the procedures of the European Commission. The analysts more familiar with Brussels things – as recently written by Startmag – underline a passage from the Communication from the Commission to the European Parliament on "the role of the National Promotion Banks (NPB) in supporting the Investment Plan for Europe":
Here is the salient passage: "If, to the contrary, financing decisions require government endorsement or the members of the relevant governing bodies (eg the Board) are government officials or otherwise act under the guidance of the government, the NPB becomes a captive financial institution and must be included in the government sector in national accounts. Detailed guidance on the accounting treatment of NPBs is provided by Eurostat's European System of National and Regional ".
That is: "If funding decisions require government approval or members of relevant governing bodies (eg the Board) are government officials or otherwise act under government leadership, the NPB becomes a captive financial institution and it must be included in the public sector in the national accounts ”.
DOES CASSA DEPOSITI E PRESTITI HAVE THE RESOURCES FOR A TENDER OFFER ON TIM?
The Cassa's takeover bid on Tim would cost – according to financial rumors – around 5 billion euros. Does Cdp have the necessary money?
At the end of June 2022, the date of the half-yearly report, the company controlled by the Ministry of Economy and invested in by foundations had available capital of 1.4 billion euros. A higher level than in the recent past but not sufficient for a takeover bid on Tim, according to the technicians of the Ministry of Economy. Basically, in the event of a takeover bid on Tim, the Cassa would need to be recapitalized by the shareholders. In essence, the Ministry of Economy and banking foundations should shell out money to increase the capital of the CDP. For the Mef, shareholder with 82.77%, an outlay of 4 or 5 billion would not represent an insurmountable problem, if the counterpart were, in fact, the definitive solution on the single network.
And for the former banking foundations? Cassa's 65 shareholder entities control 15.93% of the Cdp group . A minority but significant share: in fact, according to the articles of association, the assembly of Cdp is duly constituted and can deliberate both in ordinary and extraordinary only if at least 85% of the share capital is present. That 15.93% therefore gives foundations enormous power: without them the assembly of Cdp is null (the rest of the capital, equal to 1.3%, is own shares).
But the hypothesis of a takeover bid launched not only by Cdp but also by the funds that already gravitate around Tim and Open Fiber – not to mention others who are heating up the engines such as CVC – could mitigate the financial impact for the subsidiary. by the Mef and owned by the banking foundations.
THE PERPLESSITIES OF THE FOUNDATIONS
In the event of a recapitalization, what would the foundations do? “It is unlikely that all the credit-mining institutions will participate in the recapitalization, their current accounts do not allow it”, an insider close to the world of foundations told Startmag last August . But if that were the case, they would fall below that 15% which, as mentioned, is a crucial threshold for playing an active role. Then, even if they do not flock to the government's appeal, they could even drop below 10% and thus lose (according to article 15 of the statute) the right to present their own list and to have representatives on the board of directors of Cash, including the president.
THE ANALYSIS OF THE SUN 24 ORE AND MF ON THE CAPITAL OF CDP
The question of resources is therefore crucial. Mf / Milano Finanza wrote today : "The free capital of Cdp in the summer of 2018 was 4.5 billion, which became 300 million in June 2021. The current board has managed (probably not surprisingly) exit operations from previous investments, for approximately 750 million euro and the dividend pay-out carried forward to the provisions of the articles of association, around 50% compared to 80-100% of the previous management. In short, free capital has been partially reconstituted, but remains around 1 billion with some subsidiaries (the first thought goes to Ansaldo) which could soon require capital injections, as was the case for Saipem. Not only that, but taking over Tim is not so much or in any case it is not just a problem of equity, but of enterprise value. The acquisition of Telecom involves the assumption of 26 billion in debts and Cdp remains a company subject to the supervision of the Bank of Italy ”.
For this reason, added today the financial newspaper of the Class group ( in which the major banks active in Italy have a non-secondary role ), "if the government really wants to make the Cassa the pivot of a public telecommunications network, it will have to find allies, that in Open Fiber there are (the Macquarie fund). Vivendi herself (main shareholder with 24% of Tim) has already applied to dialogue with the government. In short, the will is clear, the goal can be shared, but the road to reach the holy grail of the single network will probably be uphill ”.
Numbers and considerations that were already traceable in August in the Sole 24 Ore: in recent years the capital of the Cassa "has been dwindling due to its significant use in finance operations (so much so that at the end of 2021, when the new management, the bar marked 300 million compared to over 4 billion in 2018). A path, that of the reconstitution of available capital, which leverages the management of shareholdings according to a principle of rationalization and rotation of existing ones, once the objectives have been achieved, and on a more prudent management of the pay out which has been brought back to 55% statutory". While from 2018 to 2020 – as can be seen from an elaboration of Cdp's company data – the pay out was 80% and in 2018 100%.
See you in the next episode on Tim and surroundings.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/cdp-tim-opa/ on Tue, 08 Nov 2022 10:17:56 +0000.