TIM Approves 20 Billion Dollar Sale: Telecom Italia (TIM) has given the green light to a €19 billion ($20 billion) deal to sell its fixed-line network to U.S. private equity firm KKR. This makes TIM the first major European telecom company to part with its landline infrastructure.
The deal, supported by Italy’s Prime Minister Giorgia Meloni’s conservative government, involves an asset of national strategic importance as Italy aims to bridge its digital divide with the rest of the European Union. The sale is a crucial component of TIM CEO Pietro Labriola’s strategy to revitalize the debt-laden former monopoly, which is struggling to make essential investments in its aging grid.
The board initiated a review of KKR’s offer on Friday and approved it on Sunday, as announced by TIM. The deal, which includes debt, is valued at €18.8 billion, potentially rising to €22 billion if specific conditions are met. The earn out is primarily tied to a long-discussed merger of TIM’s grid with that of state-backed fiber optic rival Open Fiber, a move that would alleviate competitive pricing pressures. TIM expects the deal to conclude in the summer of 2024, allowing the company to reduce its financial debt by approximately €14 billion.
Cash-strapped TIM also intends to cut half of its 40,000 domestic staff and concentrate on its service operations. TIM CEO Pietro Labriola expressed his satisfaction, saying, “Two years of hard work… culminate in a historic decision: creating two companies with new growth prospects.”
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To oversee an asset deemed nationally strategic, the Italian government has authorised the Treasury to spend up to €2.2 billion to acquire a 20% stake in the network alongside KKR, which is already a minority investor in the grid. The Treasury already controls TIM’s second-largest investor, state lender CDP.
TIM stated that it would not subject the board’s decision to a shareholder vote, which is a setback for major shareholder Vivendi. Vivendi, owning 24% of TIM, has been pushing for a higher price and raised concerns about the sustainability of the remaining business. It deemed the board’s decision “unlawful” and pledged to use “any legal means at its disposal to challenge” it. Vivendi believed that the sale should require an extraordinary shareholder vote and approval from an internal TIM board committee for related-party transactions, given that the Treasury controls TIM investor CDP and is investing in the grid.
TIM also dismissed an alternative plan proposed by London-based investment firm Merlyn Advisors, an idea pushed by Vivendi, deeming it not in line with its strategy. Merlyn Advisors indicated that it reserves the possibility of taking steps to call a shareholder meeting to determine whether the plan approved on Sunday aligns with shareholders’ wishes.