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The government whitens the Americans of Kkr who had too many Crickets on Tim’s network: go ahead with the offer from Cdp-Macquarie

The government whitens the Americans of Kkr who had too many Crickets on Tim's network: go ahead with the offer from Cdp-Macquarie

Facts, numbers, rumors and scenarios on the Tim network after the offer launched by Cassa depositi e prestiti (controlled by the Mef) and the Macquarie fund. The torpedo to Kkr and Jp Morgan

THE GOVERNMENT SHIPS KKR'S AMERICANS ON THE TIM NETWORK AND PREFERS CDP AND MACQUARIE

The government torpedoes the American fund Kkr which aimed at Tim's network and instead gives the green light to the CDP (controlled by the Mef) which with the Australian fund Macquarie presented an offer – more loose for Tim in terms of cash – for the purchase of the NetCo to be set up into which the Tim group will merge the network and the subsidiary Sparkle (submarine cables). Evidently the move by CDP is also more appropriate from the strategic point of view of the executive, given that the Prime Minister, Giorgia Meloni, has spoken of the need for a national network under public control .

HERE ARE THE ADVISORS OF KKR ATTAPIRATI, FIRST OF ALL JP MORGAN

Therefore, the Americans and the always American advisors of Kkr were attracted in the Tim dossier, namely Jp Morgan, Morgan Stanley and Citi. Vittorio Grilli is therefore disappointed. The former holder of the Treasury is in fact Chairman of the Corporate & Investment Bank, EMEA, in the US investment bank JP Morgan. Yet Grilli is not lacking in ministerial appointments, as are shores in the centre-right majority.

THE WEIGHT OF CRICKETS IN THE MINISTERIAL ROOMS

From May 2005 until November 2011, Grilli was director general of the MEF's Treasury Department, confirmed by ministers Domenico Siniscalco, Tommaso Padoa-Schioppa and Giulio Tremonti. On 28 November 2011 he was appointed Deputy Minister of Economy and Finance in the Monti government, a position he will hold until 11 July 2012, when he was appointed Minister of Economy and Finance, replacing Monti who had held the position until then. .

HOW TO REOPEN THE GAME ON THE TIM NETWORK

But what happened on Sunday 5 March? The substance is that Cassa depositi e prestiti is reopening the game for the Tim network, presenting an offer together with the Australian fund Macquarie for the infrastructure of the telephone group. The proposal was approved yesterday by an extraordinary council of Cdp and sent to Tim in the evening, who already had an offer for the network from the American fund Kkr on the table. The proposal expires on March 31st, the same deadline that Tim's board gave to Kkr on February 24th.

THE NOTE FROM CDP AND TIM

What did CDP and Tim communicate on Sunday 5 March? We see. "The Board of Directors of Cassa Depositi e Prestiti – reads a note from Cdp – which met under the chairmanship of Giovanni Gorno Tempini, gave the go-ahead for the presentation of a non-binding offer by Cdp Equity, jointly with Macquarie Asset Management, for the purchase of Tim's NetCo to be set up, which will include the infrastructural network and the investment in Sparkle. The offer will be valid until 31 March 2023". A few hours later Tim released a note confirming receipt of the offer. «The offer will be submitted to the preliminary examination of the Related Parties Committee, pursuant to the legislation applicable to CdP Equity, as a related party of TIM, and will subsequently be brought to the attention of the Board of Directors, where possible in the meeting already scheduled for March 15, 2023 or on another date to be defined», reads the text.

THE NUMBERS OF THE OPERATION

After the green light from the Meloni government, a couple of days ago, what Cdp and Macquarie put on the plate, according to Il Sole 24 Ore , is an ameliorative offer: there are still 20 billion on the plate but with different conditions that would lead to more liquidity to Tim for 1.5-2 billion euros (the newspaper La Stampa speaks of 2-2.5 billion instead). Furthermore, an ad hoc vehicle and no longer Open Fiber could carry out the operation, added the Confindustria newspaper. Even if the government's strategy is that of a unitary network.

COMPARISON OF KKR'S AND CDP'S PROPOSALS

Kkr's proposal is structured, approximately, on 10 billion of debt and 10 of equity (so Fibercop would be valued in which the American fund invested 1.8 billion two years ago, winning 37.5%). In 2021 Telecom had rejected an offer from the US company to buy the entire business for 10.8 billion euros. Tim, after the possibility of a joint offer between Cdp and Kkr hasvanished , therefore, two alternative offers will be found for the purchase of his network.

NETWORK ASSESSMENTS

Both offers – that of Kkr and that of Cdp-Macquarie – concern the fiber backbone, the secondary network contained in FiberCop – of which Kkr already has 37.5% – and Sparkle's international cables. The absolute value would be lower than that of the US fund – 18 billion against the 20 offered by Kkr – but would have – underlines Corriere della Sera – a greater part in cash and would contain fewer clauses to which the price is linked. The value of 18 billion would be represented by 10 billion in cash – 2-2.5 billion more than Kkr – and by 8 billion in debt that CDP and Macquarie would take on with the network. “The direct collection for Tim would also be higher due to the attribution of a higher value to the fiber backbone which he controls 100%, and lower for FiberCop, which is instead 37.5% owned by Kkr which in his offer he would have valued it at 10-12 billion”, comments Corriere della Sera .

CASH ISSUE FOR TIM

The Cassa would offer more cash, up to 10 billion, and then 8 billion of debt plus an earn-out of 2 billion which would be paid upon the fulfillment of certain conditions. However, both proposals remain far from the 31 billion of Vivendi's assessments, the clash could thus be moved to the shareholders' meeting and there, at the count, the vote of the funds and therefore of the market would be decisive.

DEBT FILE

The valuation of NetCo made by Cdp-Macquarie – according to the rumors of the newspaper La Stampa – "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 a company infrastructure: a sign that there is room for more debt to finance the operation”.

FIBERCOP CHAPTER

But in particular – adds the newspaper La Stampa – "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 EUROPEAN SCENARIO AND THE CONDITIONS OF BRUSSELS

The position of the European Commission hangs over the whole operation. Repubblica writes : “The industrial project behind the offer envisages – after the green light from the EU Antitrust – putting together Tim's infrastructure with that of Open Fiber in a company of the national fixed network. However, given that there are only two networks of this type in Italy and there are no alternatives (such as cable TV) it is probable that Brussels will impose corrective measures, which in jargon are called remedies, to continue to guarantee adequate competition" .

THE NUMBERS OF KKR'S OFFER: OFFERTONA?

“Big offer from the Americans? Not much", wrote Startmag almost solitary in February immediately after the announcement of the Kkr offer: "First: you write 18 billion but you have to read 13-14 billion – notes an analyst familiar with the dossier – given that the fund Kkr has 37.5% of Fibercop. In 2020, the US fund had valued Fibercop 7.7 billion in the act of acquiring a minority stake of 37.5% from Tim. Second: Kkr's assessment is substantially in line with all advisor assessments. In fact, at the time of the Rete Unica project – during the Draghi government – there was talk of a CDP offer of 16-17 billion".

KKR'S SECOND FLOP

It's the second flop of Kkr on Tim. In November 2021, Kkr had expressed interest in the launch of a public purchase offer on the entire Tlc group, which valued the Tim shares at 0.50 euros each: "The operation – Il Sole 24 Ore recently recalled – it was rejected by the telephone group's board of directors after a long confrontation with the Americans who, in the final act, were also accused of never having presented an offer , but of having remained firm in an expression of interest. A point, this, on which Kkr has however always replied that it did not have Tim's go-ahead for a confirmatory due diligence ”. But according to Start Magazine 's reconstruction , there was also the Draghi government 's informal refusal of the American offer . Despite the support of pro-Draghi turbo-liberal economists .


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/il-governo-sbianca-gli-americani-di-kkr-che-avevano-troppi-grilli-sulla-rete-di-tim-via-allofferta-di-cdp-macquarie/ on Mon, 06 Mar 2023 07:06:54 +0000.