A colony of private equity companies has been watching TIM
More private equity companies expressing an interest in breaking up Telecom Italia. On March the 25th CVC Capital Partners submitted a non-binding expression of interest for a stake up to 49 per cent of Telecom Italia’s (TIM) enterprise services arm, according to Reuters’ sources.
The non-binding approach targets TIM’s cloud, internet of things (IoT) cybersecurity and connectivity services for large corporate clients, which broker Bestinver valued at €10.5 billion ($11.5 billion) based on last year’s core earnings of between €730-760 million.
CVC is proposing a reallocation of the business as part of a group reorganisation, one of the sources said. In CVC’s scheme the newly-created unit would find jobs for 6,500 people out of the 42,000 staff that TIM currently employs in Italy, said the source, which revealed that multiple private equity investors are looking to invest in TIM’s services arm. Apollo Global Management is allegedly also looking at a potential investment into TIM’s service operations.
“At least three big funds are assessing TIM’s situation with the view of a potential investment into its service arm,” the Reuters source said.
Meanwhile Italy’s government is drafting new rules that will force owners of strategic assets to notify it of any preliminary discussions with potential suitors. These new safeguards are part of a broader plan to beef up Italy’s existing anti-takeover rules. They are primarily aimed at policing any changes to TIM’s ownership structure, government officials have told Reuters.
Reuters said CVC has been watching the reorganisation at TIM and waiting for its moment and now it is set to formalise an expression of interest in TIM’s service arm, possibly on Friday. TIM is already assessing a €10.8 billion ($11.9 billion) takeover approach from US fund giant KKR.
Chief executive Pietro Labriola has unveiled plans to split TIM’s service businesses from its domestic fixed network operations to unlock value and pursue merger and acquisition deals.
After tumbling to a record low earlier this month, TIM’s shares jumped as much as 7.2 per cent to hit a three-weeks highs around €0.35 euros on Friday, with traders and analysts citing speculative appeal linked to private equity interest. The KKR bid was pitched at €0.505.
TIM, whose top investor Vivendi has dismissed KKR’s offer as too low, is seeking to revive a long-held project to merge its fixed line assets with those of Open Fiber. This move would be backed by TIM’s second-largest investor, state lender CDP, which own a 60 per cent stake in Open Fiber.
TIM has now kept left KKR waiting for nearly four months without an answer before engaging in formal talks earlier this month. Reuters’ insider says it is preparing another letter to request further clarifications from KKR. The same source said TIM board of directors will be updated on the KKR developments at a meeting next Tuesday.