Cdp lunge on the Tim network: the title jumps on the stock market

The die is cast. Cassa Depositi e Prestiti, in alliance with the Australian fund Macquarie, takes the field for Tim’s network and, at the opening of trading, the stock flies to the stock exchange. Late yesterday afternoon, at the end of an extraordinary meeting, the board of directors of the financial arm of the Treasury gave “the green light – reads a note – to the presentation of a non-binding offer by Cdp Equity”, a wholly controlled by the Cassa, «jointly with Macquarie Asset Management, for the purchase of Tim’s NetCo to be set up, which will include the infrastructure network and the stake in Sparkle», the international cable web.

The offer is valid until March 31st. The same deadline that Tim’s board, last February 24, gave to Kkr, the American fund which in turn presented the other non-binding proposal, to improve it. Also on this occasion Tim, first of all, will submit the offer “to the preliminary examination of the related parties committee”, explain the former monopolist, since Cassa is also the second largest shareholder of Telecom after Vivendi, with 9.8% . Then the proposal will be brought to the examination of the board, if possible, already in the meeting already scheduled for March 15 or “on another date to be defined”.

A new phase therefore opens in the long and tortuous story of the web. According to financial sources, the offer from CDP and Macquarie would be overall equivalent to that presented by the Kkr fund: both would be worth a total of around 18 billion euros. The difference would be in the composition. According to the same sources, the Cdp scheme (assisted by Credit Suisse) would be an improvement on that of Kkr for 2-2.5 billion euros in terms of greater effective cash for Tim. The valuation of NetCo would have a lower debt component, equal according to rumors to 7.7 billion against approximately 10 of Kkr, well below the debt capacity of an infrastructure company: a sign that there is room for more debt to finance the ‘operation.

But in particular, the valuation of FiberCop, the company where the secondary network is inserted, essentially the last mile from the road lockers to the customers’ homes, would be well below the 12 billion attributed by Kkr in its offer. This is one of the cards CDP counts on the most, because by valuing the primary network more, more liquidity is paid to Tim, given that 37.5% of FiberCop is already in the hands of Kkr. It is said that the valuation of Cdp&Co would be even lower than the 7.7 billion at which Kkr valued it two years ago. But the US fund, at the time of its entry, obtained veto power. It means that in case of disagreement it could block the gears of NetCo where FiberCop is destined to converge.

The antitrust node remains on the CDP proposal given that Cassa and Macquarie are also the shareholders (respectively with 60 and 40%) of Open Fiber, Tim’s competitor on the network. A dialogue will be opened with the EU Commission on this and, if necessary, remedies will be taken such as the transfer of overlapping areas. There is talk of interested funds, but also of operators such as Fastweb. After all, Open Fiber will be the subject of a second part of the operation, with a future merger that may take place when the doubts about competition have been resolved. Then we need to understand the weight that synergies have in the offer, in addition to state incentives, the latter according to rumors valued at 1.5 billion. It will be a matter for Tim’s advisors (Mediobanca, Vitale&Co and Goldman Sachs), the board of directors and, ultimately, the shareholders who are no longer represented there such as Vivendi. The antitrust risks and the distance in valuations from the 31 billion estimated by Paris would make the French very cold in the face of the evolution of the scenario. And with 23.75% they have the leverage to block everything in an extraordinary meeting and focus on an alternative plan for Tim.