UPDATE: TIM’s top investor Vivendi digs in after KKR’s approach

KKR, whose approach gives TIM an enterprise value of €33 billion when including net debt, could offer €0.505 a share for what would be Europe’s biggest private equity buyout.

While that represents a 45.7% premium to the closing price of ordinary shares prior to the announcement, it is below the €1.07 Vivendi spent on average for its 24% TIM stake.

“The premium is above most of the recent delistings registered in the EU telecom sector and although the valuation may appear undemanding this could be explained by TIM’s difficult fundamental outlook,” UBS said.

KKR aims to take TIM private, which analysts said would make a restructuring easier.

A minimum acceptance threshold of 51% would apply for any takeover, meaning Vivendi’s backing is not strictly needed.

However, pushing through extraordinary resolutions requires a two-thirds majority and KKR would struggle to turn TIM around without its top investor onboard.

Vivendi has seen TIM shares lose 70% since it became a shareholder in mid-2015, against a 40% sector drop.

Pressure on CEO

Two profit warnings since July, amid ferocious domestic competition and a costly football rights deal with Dazn, have strengthened Vivendi’s hand in demanding a change at the helm.

Having failed to stem TIM’s revenue decline, chief executive officer (CEO) Luigi Gubitosi had presented the board with a project to squeeze cash from TIM’s assets, including its prized fixed line but failed to win Vivendi’s backing, sources have said.

Vivendi wants to get directly involved in discussions over TIM’s fixed assets, sources have said, as a stalled plan to merge them with those of rival Open Fiber gets fresh impetus.

Such assets are deemed strategic by the government which has created a special committee to follow developments with KKR’s approach. The committee held its first meeting on Monday night and Industry Minister Giancarlo Giorgetti, one of its members, on Tuesday said the government would assess any project concerning a strategic asset when it has the details.

TIM’s fixed line business provides Italy’s main telecoms infrastructure and plays a major role in broadband roll-out efforts on which Rome plans to spend billions of euros of European Union funds on to improve coverage.

Source: The Hedge Market