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TIM’s Network Asset Sale: Navigating KKR Deal Amid Vivendi Opposition and Regulatory Hurdles

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The Italian telecommunications giant, TIM, is set to enter exclusive negotiations with the US investment fund KKR regarding the sale of its network assets. This move comes as private equity firm KKR wins over its rivals, CDP and Macquarie, in the bid for TIM’s fixed line networks business.

TIM’s board has given CEO Pietro Labriola the green light to start negotiations with KKR, which already holds a stake in TIM’s last-mile operator FiberCop. KKR has been given a deadline of September 30 to submit a binding offer, following the acceptance of their earlier non-binding €23bn bid over the rival bid from CDP and Macquarie.

This may seem like the sale is nearing completion, but TIM still has to overcome several hurdles before the deal can be finalized. These include obtaining both regulatory and governmental approval. Meanwhile, TIM’s shareholder Vivendi plans to block the move, claiming that the offer undervalues the assets. Vivendi holds a 23.75% stake in TIM and has previously valued the assets at €31bn. Although reports in Italy suggest this valuation could drop to €26bn, it is still higher than KKR’s non-binding bid.

Despite Vivendi’s opposition, TIM remains optimistic as it makes a deal with KKR, describing the bid as “preferable in terms of executability and timing.” This suggests that the company is confident in getting the deal through the regulatory process. Nevertheless, given Vivendi’s reaction, there is still a significant distance to go before the NetCo sale can be considered complete.

It’s worth noting that any transaction involving NetCo is subject to regulatory approval and also the government’s ‘Golden Power’ authority, which enables them to have a say on the fate of assets considered to be of strategic national importance, as well as obtain antitrust approvals. This provides an additional layer of complexity to the sale process and could potentially impact the outcome.

In conclusion, while KKR seems to have the upper hand in the negotiation process, the road to finalizing the sale is far from smooth. Being subject to various regulatory approvals and opposition from major shareholder Vivendi complicates the matter and ultimately prevents the deal from being completed in a straightforward manner. As the deadline for submitting a binding offer approaches, it will be interesting to see how the situation unfolds and if TIM can indeed reach a successful agreement with KKR.

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