Tim, this is how Merlyn and Bluebell seduce Vivendi

The activist shareholder campaigns are coming to life in view of the next TIM meeting on April 23rd.

At the meeting, the shareholders of the telephone company will have to decide whether to entrust the outgoing CEO Pietro Labriola with another mandate at the helm of the group or choose between one of the two CEO candidates proposed by the minority shareholders : Stefano Siragusa (former CEO of Tim) on the list of Merlyn Partners fund and Laurence Lafont (French former Google manager) deployed by Bluebell Capital Partners.

Yesterday Merlyn integrated the communication of the plan he had presented with the TValue list. The plan does not change (evaluate the deal on the sale of Netco, sell Tim Brasil in 2024, sell Tim Consumer in 2025, create TechCo and establish a new and more inclusive governance) but the fund has now exposed the numbers, which in the letter to shareholders they had not been indicated . “With our plan, Tim's ebitda will grow by 10%,” assures Alessandro Barnaba's fund to Tim shareholders.

Meanwhile, Bluebell also presented its plan in view of the assembly after Merlyn's plan with the TValue list. On the one hand, the English fund points the finger at the decision to sell NetCo "(TIM's most valuable asset)" because it was "flawed from the start", as for ServiceCo "we expect the new board and management to evaluate the best way to maximize the value of each component (Tim Brazil, Enterprise, Consumer)”.

However, the two funds are sailing alone: ​​the proxy advisors ISS and Glass have in fact recommended that Telecom Italia investors vote in favor of the list presented by the current board.

Still no vote from Vivendi. The French media conglomerate, owned by the Bolloré family, holds a 23.75% share (it is Tim's largest shareholder) and over 17% of the voting rights of Telecom Italia and is currently only involved in the board of auditors .

According to what Radiocor understands, careful monitoring is underway by Consob which would have asked for more details on the proxies in view of the assembly vote, the plans and the lists.

All the details.

As mentioned at the beginning, yesterday Merlyn Partner went into detail about the previously announced TValue plan, outlining six different scenarios: all include the sale of Tim Brasil and Tim Consumer, while the sale of Netco is contemplated in 4 of the 6 hypotheses to be evaluated .

In the first scenario, for example, foreseeing the sale of Netco in the third quarter of 2024 (as also foreseen by the Labriola plan), the sale of Brazil in the fourth and of Consumer in the first quarter of 2025, it is expected to go from 20.3 billion of 2023 debt at 6.6 billion in cash. At the same time, the fund estimates an average annual growth over 5 years (2023-2028) in EbitdaaL of 10%, "an acceleration compared to the indications of Tim's Capital Market Day", with "around 170 million of positive impact driven by shift of approximately 3 thousand resources from Consumer to the remaining businesses and positive liquidity in 2025-2028" dedicated to acquisitions to support the growth of the TechCo.

THE SCENARIO WITHOUT THE SALE OF NETCO

In scenario 5, for example, which does not include the sale of Netco, but is based on the sale of Tim Brasil in the fourth quarter of 2024 and of Consumer in the first quarter of 2025, debt is expected to decline from 20.3 to 8.2 billion in 2025. “We are at a pivotal moment in Tim's history, a time when critical decisions are being made about the business and the capital allocation made. We are very convinced – we read in the communication late yesterday evening – of the strategic role that Tim plays in Italy and of the opportunity to create value" with "a plan that is not based exclusively on the sale of NetCo".

TIM'S INTRODUCTION TO MANAGEMENT

At the beginning of March, Tim — without the network, after the sale of Netco but with Sparkle still included in the perimeter — presented its new plan for 2026 which aims for revenues to grow by an average of 3% per year over the next three years, an EBITDA after lease of the group increasing by an average of 8% per year and with "sustainable and further reducing debt, with leverage (i.e. the debt/ebida ratio, ed.) by 2026 expected at 1.6-1.7 times".

The plan presented by the board of directors led by Labriola "not only lacks clarity and financial sustainability, but can also lead to substantial risks", highlights the fund. Now, continues Merlyn, "it is up to us shareholders to express ourselves and decide what will be the right path to follow for our company".

SALE OF TIM BRASIL NECESSARY FOR MERLYN

The immediate sale of “Tim Brasil, as early as 2024, will generate “the liquidity cushion” to begin deleveraging and start investing in TechCo. Already "by the summer of 2024 we will start negotiations with potential buyers to accelerate the sale process of Tim Consumer and bring it to fruition in the shortest time possible and in any case no later than mid-2025". TechCo “will act as a market aggregator, taking on the role of predator rather than potential prey.”

WITH OR WITHOUT NETCO

The agreement on NetCo, concludes Merlyn, “does not limit the TValue plan. Even without the NetCo perimeter, Tim remains the largest infrastructure player in Italy with a strong focus on the intelligent part of the network". The TValue plan is aimed at maximizing value for shareholders", involving the shareholders, "starting from the main ones, Vivendi and Cdp. The TValue plan welcomes all existing stakeholders including KKR and any others who are willing to contribute in the future.”

WHAT THE BLUEBELL FUND OFFERS

Bluebell (which owns 0.5003% of the shares of the former Telecom Italia company) also presented its plan yesterday.

The activist fund said it was against the company's split and that the sale of Telecom Italia's Brazilian branch "should not be a priority" – unlike Merlyn's plan – given the "value of the option considering its higher growth rate high, almost double profitability and lower financial leverage than Tim".

Bluebell believes that the strategic decision to sell NetCo (TIM's most valuable asset) was wrong from the start (also evidenced by the extreme rarity of such a move among telecom operators). The English fund thus winks at Tim's French partner, who has always been against the sale of the network to KKR.

According to the English fund, the agreement “was negotiated in total contempt of the shareholders (not only of the largest shareholder Vivendi), who were prevented from voting on such a transformative transaction”. Therefore the only mandate provided by Bluebell to its board candidates “is to review the status of the transaction and act in the best interests of Tim and all of its shareholders”.

“Our candidates' unique and shared objective is to maximize TIM's value, working together with minority directors without any personal ambition,” reads the plan announced on April 11. Tim "needs to rediscover that harmony between directors, shareholders and management that has been lost in recent years", concludes the English fund.

THE POTENTIAL UNEXPRESSED SO FAR

Furthermore, the company led by Giuseppe Bivona sees an upside potential for Tim in the order of 100% compared to the current level. “If the strategy is implemented correctly and a harmonious environment is re-established between management, board members and shareholders, there should be no reason why Tim should trade at a discount to peers (currently estimated at around 60% on EV/ EBITDA AL and at approximately 50% on EV/EBITDA AL – Capex vs peers)”, we read in the plan. “But it all comes down to execution, execution, execution,” the fund concludes.

Not only. The co-founder of Bluebell, Giuseppe Bibona, did not miss the opportunity to begrudge both Labriola and Siragusa, the CEO appointed by the fund led by Alessandro Barnaba.

“Between the two,” Bibona highlighted to the newspaper La Verità, “I wouldn't know who to save. Fundamentally, Bluebell also took the field with a view to helping the company. In June 2023 I was contacted by Siragusa who proposed that I reach the 5% threshold to call an extraordinary meeting and bring down the board of directors before approving the operation on the network. I told him I wasn't willing to destabilize the company. There is the risk that he is driven by a thirst for revenge against Labriola, and I don't even want to imagine what he would be able to do if he were to join the council."

Bibona's words – a harsh attack on the candidate for CEO of the Merlyn fund – do not sound so sharp towards Tim's current number one, Pietro Labriola. Which instead is seen as smoke and mirrors by the French at Vivendi.

Another attempt to bring Vivendi on its side comes in the interview of the candidate for president of the Merlyn list of TValue over the weekend in Repubblica .

“We simply have a different vision for Tim in the interest of the shareholders who must be involved according to a correct engagement process. Starting with CDP and Vivendi, the largest shareholder, but involving everyone, including KKR", remarked Umberto Paolucci, leader of the Merlyn fund's list as presidential candidate for the next TIM board of directors.

Paolucci added: “Vivendi is the largest shareholder. He declared that he is a financial investor, not interested in management, but in respecting the governance rules and enhancing the value of the stock. The dissatisfaction with the choices of method, rather than merit, of the Board of Directors is well known, which led to a dispute which, for us, could have been avoided. TValue wants to re-establish a relationship of trust with shareholders, through transparent governance that respects everyone, a prerequisite for achieving a strong appreciation of the stock. On this basis we hope to convince Vivendi to trust us, to realize together and in agreement with the institutions the TValue project which is the industrial solution that Tim and the country need, in the interests of all shareholders and workers".

Bluebell Capital Partners Limited (a company based in London, as manager of the Bluebell Active Equity Master Fund Icav fund, which announced that it holds 0.5003% of the capital) also presented its list of six names, indicating Paola as president Giannotti De Ponti, former member of the Tim board in recent years, with over 30 years of international experience in the financial sector in the Corporate and Investment Banking area. In addition to Paola Giannotti de Ponti, the list includes Eugenio D'Amico, full professor of business economics, Paolo Venturoni, CEO of the European Organization for Security (Eos), Paolo Amato, former president and board member of AirOne and on the board of directors of Fincantieri, Laurence Lafont, vice president EMEA strategic industries of Google Cloud, Monica Biagiotti, head of global consumer marketing at Mastercard.

The English fund has designated the French manager Lafont as CEO of Tim: "an experienced and highly successful leader in the technology and telecommunications sector (Google, Microsoft, Oracle, Nokia, Orange)" wrote Bluebell in the plan.

The announcement came only yesterday as the fund waited, to avoid any doubts of conflict of interest, for the manager to first leave Google (with which Tim works, ed.) where she held the role of vice president strategic industries EMEA Google Cloud.

AND THE ASEPTIC POSITION AT THE TIME OF VIVENDI

Unlike the rumors of recent days, the French shareholder Vivendi (23.75% of Tim's capital) presented a list only for the appointment of the board of auditors.

Which list will Vivendi support in the meeting that has not presented its own list for the board of directors? As mentioned, Merlyn and Bluebell are competing for Vivendi's vote.

But circles close to the Mef believe that in the end – a scenario which is also a hope, in fact – the French can abstain, effectively giving the green light to the list presented by the current board with the support of the shareholder Cassa Depositi e Prestiti ( which has 9.81% of Tim ).

But there are those who also see the American Elliott fund at work ( here is the reconstruction by Start Magazine ).

Finally, as the Tim meeting approaches, the recommendations of the proxies arrive who advise the shareholder funds to vote.

The ISS proxy advisor confirms the voting recommendation for the board of directors list which indicates Pietro Labriola as CEO and Alberta Figari as president. The new publication, explains Iss, takes place "to reflect the new information published by Bluebell Capital Partners". Yesterday “Bluebell published its plan for Tim” and, ISS specifies, “our voting recommendations remain unchanged”. Bluebell, ISS recalls, announced only yesterday "Laurence Lafont as CEO candidate", awaiting the exit of the French manager, with a career in telecommunications and digital, from the Google group. For this reason Blubell was unable to reveal Lafont's candidacy before yesterday.