Network Tim, will Kkr eat Sparkle too?

29 August 20239 months ago babelfish

Effects and scenarios after the decree approved by the government which gave the green light for the purchase by the Mef of a minority stake in Tim's network company alongside the American fund Kkr. The Spark case. Facts, numbers, unknowns and scenarios

Yellow Sparkle in the dossier on the Tim network.

Here are all the details on the next steps that await the group led by CEO, Pietro Labriola (in the photo)

HOW THE TIM STOCK IS ON THE STOCK EXCHANGE AFTER THE GOVERNMENT DECREE

The Milan Stock Exchange session opened today with the Ftse Mib index up 0.38% to 28,654 points. Tim is on the shields right from the start (+2.78% to 0.29 euro) after the Council of Ministers yesterday evening gave the go-ahead, and guaranteed the financial resources, for the purchase of a share of minority in the network society alongside Kkr. During the day, the increase in shares in Piazza Affari then eased.

WHAT THE GOVERNMENT HAS DECIDED ON TIM

Green light from the government for entry into the network company, the so-called Netco which will be spun off from Tim. The Council of Ministers yesterday approved a decree law to find coverage for the investment. Then a Dpcm was also approved on a proposal from the Mef and Mimit which authorizes participation in the purchase offer up to a maximum of 20% of the company headed by Tim, together with the Kkr fund and other national entities.

THE DRAFT DECREE ON THE TIM NETWORK AND THE ROLE OF THE MEF

The Mef-Kkr offer for the acquisition by the ministry of a 15-20% stake in Netco will have to comply with the "definition of an industrial plan suitable for achieving the enhancement and development of the fiber optic telecommunications network". The agreement between the shareholders envisages, inter alia, "NetCo governance methods suitable for ensuring the achievement of the objectives of the business plan" and "adequate powers for the Ministry of the Economy and Finance to monitor management and mechanisms, also of governance, oversight by the same Ministry on the relevant decisions for the purpose of pursuing the objectives of development and strengthening of NetCo and on matters of strategic importance and national security, even in the event of a change in the shareholding structure". This is what can be read in the draft of the decree approved yesterday by the Council of Ministers. Furthermore, the ministry will be able to appoint one or more experts "with proven experience in the reference sector and in similar operations" for the financial and legal aspects, "for identifying the methods of entry into the operation, including the phase of determining the price purchase of the shareholding, and the execution of the corporate obligations required for the purpose of completing the acquisition”.

THE WORDS OF GIORGIA MELONI

The Prime Minister Giorgia Meloni wanted to give the opening of the CDM «the political significance of our decisions. After having found a serious solution for ITA with an agreement with Lufthansa, European Commission permitting, and which sometimes raises problems that we hardly understand, now is the time to give a perspective to what has been one of the international telecommunications champions".

MINISTER GIORGETTI'S POINT

Economy Minister Giancarlo Giorgetti illustrated the commitment to state participation, up to 2.2 billion "aimed at using special powers and affecting security issues on an infrastructure that is decisive for the country's future", he underlined the minister.

FINANCIAL COVERAGE

The coverage will come from the remaining availability, equal to 2.5 billion, of the "destined assets" created by the MEF in 2020 for operations on strategically important companies identified with the Prime Minister's Decree.

THE ROLE OF AMERICANS

As for the role of the Americans of Kkr (who move in Italy also thanks to the good offices of the advisor Vittorio Grilli, former owner of the Mef), who should have 65% in Netco at the end of the operation, Giorgetti reiterated that «Kkr it is not new to Telecom-Tim, the stake in Fibercop already exists, it is a natural interlocutor. What interests the government – said Giorgetti – is to reaffirm public control over some strategic choices".

WHAT THE OTHER INVESTORS WILL BE

In the meantime, discussions continue between potential Italian investors who should ensure a hold on 35% of the network company. "Cdp's involvement is possible taking into account Antitrust restrictions", Giorgetti specified because the Cassa is already the majority shareholder of Open Fiber. “F2i could also participate in the operation, for a total value of around 20 billion. To enter the game, the manager would have to raise over one billion on the market. In practice, F2i and Cdp should split the 15% to close the reorganisation”, wrote Corriere della Sera.

THE SPARKLE CASE

The Mef will therefore participate in a minority position (15-20%) in a new company (Newco) which will see the Kkr fund in the majority and which by the end of September will make a binding offer of 21 billion to take over the Tim network. Inside the perimeter there is also Sparkle, the company that manages international submarine cables, considered strategic, worth 1 billion and which could be spun off and controlled 100%, underlined Repubblica .

WHAT YOU READ IN THE DRAFT ON SPARKLE

The Ministry of Economy and Finance will be able to acquire, even at a later stage, "the entire capital of Sparkle Spa". This can be read in the draft of the decree law approved yesterday by the Council of Ministers which authorized the Mef to present, jointly with Kkr, possibly with other minority investors, a binding offer for the acquisition of a 15-20% stake in the capital of NetCo, within the maximum resource limit of 2,200 million.

THE NEXT STAGES

The overall offer on the network will then have to be approved by Tim: it is probable that a special meeting will be called by the end of the year, between November and December, remarked by Il Sole 24 Ore : "It is not clear whether the meeting will be held in ordinary or extraordinary, the latter seat in which Vivendi, with its 24%, could effectively exercise a right of veto. In any case, to avoid disputes prejudicial to the operation process, the objective is to arrive at the appointment with the ground already leveled. In this context, a first meeting between the Government and the top management of the French group is expected shortly. After Tim, the floor will once again go back to the Government and in particular to the golden power committee, which will have to scrutinize the operation for the purposes of exercising special powers over strategic activities”.

LIVE REBUS

But what will the French of Vivendi who are currently the majority shareholder of Tim do? If the economic offer and diplomacy are not enough to convince Vivendi, the battle is destined to move to the assembly, wrote La Stampa : “With the complication of what “training” is necessary to deliberate. Kkr is convinced that an ordinary meeting is sufficient – such as when Atlantia sold Autostrade -, the French, on the other hand, believe that an extraordinary one is necessary because the sale of the network substantially changes the corporate purpose of the company. Translated: Tim would turn into a service company by abandoning all the infrastructural part”.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/rete-tim-kkr-si-mangera-anche-sparkle/ on Tue, 29 Aug 2023 07:48:56 +0000.