What are Kkr’s real goals for Tim?
Krr on Tim: autonomous management choice of the American fund or white knight, called by the number one of Tim Gubitosi in the balance, to defend himself from Vivendi's attacks? Gianfranco Polillo's analysis
It is difficult to understand, at least at the moment, what the real intentions of the Krr fund are in its war to conquer Telecom, of which Tim is only the commercial brand. Before 2016, in fact, Tim had a different identity and a very distinct company profile. She was born in May 1995, after having split from Telecom, to focus only on mobile telephony. Successful company – Tim – in those years: open to the market and with great innovative skills. The first to use rechargeable cards for mobile phones. An extraordinary success. It will remain so until 2006, when Telecom, by launching a takeover bid on the company, will decide to incorporate it into its own structures. The idea was to offer fixed and mobile networks in a single service (TIM CASA), associating one's own fixed network number with that of the SIM card. Project destined to last the space of a few months.
In fact, at the end of the year, a clear reversal of the trend. There was talk of the spin-off of the company again, with the idea of selling it, together with Tim Brasile, to reduce the burden of a particularly heavy debt. Except that on 11 September, its president Marco Tronchetti Provera, supporter of this idea, decided to resign. Guido Rossi, the theorist of Palazzo Chigi as “the only merchant bank” where English is not spoken, took over, and brought the pendulum back to its original position. No spin-off and recovery of the TIM CASA project, promising, in exchange, an opening of the fixed network to other operators as well. What in fact then happened, with the entry of new subjects forced, in any case to depend on their business, on the availability of the fixed network operator.
However, a troubled destiny, marked ever since, for a talk of the epic of "brave capitals", by a continuous uncertainty about the strategies to be followed in an infrastructure so decisive for the overall fate of the country. However, we had to wait until 2014 to reach the rebranding operation on the basis of which the TIM brand (no longer an acronym) was used for the entire fixed, mobile and internet telephony offer of the Telecom Italia company. Whose name disappeared from the collective imagination to remain exclusively a point of reference for capital and stock exchange transactions. Where the title dealt with is obviously Telecom and not Tim.
In those years Vincent Bollore became the de facto patron of Vivendi, assuming the presidency of the supervisory board of the company. At the same time Arnaud de Puyfontaine, who has always been in the world of communication, became its CEO. And since then the fate between the two companies – Tim and Vivendi – began to cross. Already in 2016, Bolloré controlled 23.94 per cent of the capital of the Italian company, becoming the de facto main shareholder of reference. De Puyfontaine consequently assumed the position of vice president, which he will maintain until the following year, when, following the resignation of CEO Flavio Cattaneo, he will become President of Telecom assuming all executive powers.
But Telecom seemed not to be enough for the French tycoon. In 2016 he negotiated with Pier Silvio Berlusconi the purchase of 100 percent of Mediaset Premium. Only a few weeks passed and Vivendi denounced the agreement, claiming that the conditions of Mediaset Premium were very different from those proposed at the beginning. He therefore proposed, as a counterpart, to acquire only 20 per cent of the company and to be able to increase the share capital of Mediaset up to 15 per cent. Counter-proposal that will be rejected by Berlusconi, but which will not prevent Bolloré from raking in the shares of the Biscione group, until at the end of the year it reaches 28.8 per cent of the capital and 29.94 per cent of the voting rights. In the end, the civil court will decide the game, condemning Vivendi to pay compensation equal to 1.7 billion euros, for the failure to purchase Mediaset Premium. Subsequent agreements between the two groups will lead to the definition of a gradual exit, over five years, of Vivendi from the capital Mediaset.
And meanwhile Tim? This time, an American fund had been interested in the company. It was the Elliott Fund (Elliott Management Corporation), founded in 1977 in New York and operating on a large scale for some time. By analysts considered the main "activist" fund in the world. His business? Entering companies in crisis, due to bad management, firing the old management, putting them back on track and then reselling them on the market at a price well above the initial outlay. Definitely a profitable business that had enabled the Fund to guarantee dividends well above that of its competitors. There is talk of an average annual return of 13.2 percent, compared to the 11.4 percent offered by the S&P 500 stock index. Despite this, a Fund not particularly popular with the big financial press: considered a predator and often referred to as: Vulture background.
Attracted to Italy by the sale of Milan by Silvio Berlusconi to the Chinese entrepreneur Yonghong, to whom he had advanced $ 303 million, without then regaining possession due to the latter's bankruptcy, today he controls the Rossoneri club from that time. of Luxembourg. In March 2018 it had bought 3 percent of Telecom, and then reached 9 percent with subsequent interventions. Same game scheme: the company was not managed adequately, so its prospective value – this is the thesis enunciated – could be well above the more than modest stock market tranche. That Italian telecommunications were not having a good time was demonstrated by the all-political clash of those years. The Gentiloni government aimed to unbundle the Telecom network, to set up, together with Open Fiber (Enel and Cassa Depositi e Prestiti), a single company capable of guaranteeing unitary management of this infrastructure.
Vivendi, the main shareholder, obviously opposed it. Telecom's value was above all in the network. Had it been subtracted from it, the losses would have destroyed an important shareholding such as the one owned by the French company. Which at the time had cost more than 1 euro per share. In the first useful meeting, therefore, the pincer "Elliott – representatives of the Italian government" had managed to put Vivendi in the minority, obtaining 10 out of 15. Among these Luigi Gubitosi, while Amos Genish , the old managing director, remained in his place, to give a sign of continuity in the management of the company. Actually: an unfortunate choice. At the beginning of May the Telecom stock was worth € 0.855 per share, six months later € 0.521 with a loss of almost 40 per cent. Forcing Elliott to intervene, to demonstrate consistency with his management credo.
Thus it was that Luigi Gubitosi, supported by the four independent directors who belonged to the Elliott Fund, was promoted to the top of the company, despite Vivendi's opposition, on the grounds that it was essential to remove a top manager who had failed. Almost three years have passed since then, but the management situation has far from improved. Prior to the stock market rally, the stock was worth € 0.347, a drop of more than 33 percent from the time when Gubitosi took over as CEO. A series of operations, such as the one relating to the financing of Dazn (340 million for 3 years), had proved a half-fiasco, offering Vivendi the opportunity of a lifetime. Under the motto: "whoever wounds by the sword, perishes by the sword" the head of the CEO had asked. When the American fund Kkr intervenes, proposing to take over the entire company at the price of 0.505 per share: independent management choice of the American investor or white knight, called by Gubitosi, to defend himself from Vivendi's attacks?
We will see in the next few days. In the meantime, the Draghi government has decided to see it clearly, setting up a task force in which all the ministers concerned are present: Franco, Giorgetti, Colao and the head of "services" Gabrielli. It will be their task to avoid that any solution passes only through the needle's eye of the conflict between the various stakeholders of the company, perpetuating that curse from which Telecom or Tim, if you prefer, cannot seem to free themselves.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/quali-sono-i-veri-fini-di-krr-su-tim/ on Tue, 23 Nov 2021 09:57:34 +0000.