TIM, Vivendi locked in boardroom wrangle as share prices soar

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Despite vehement Vivendi opposition, KKR’s €10.8 billion bid for Telecom Italia (TIM) has led to soaring share prices.

The shares were 32% higher at €0.4586 each with the KKR approach valuing shares at €0.505 each, a premium of approximately 45.7% based on the company's closing price on Friday 19 November.

This comes despite significant opposition from the company's largest shareholder Vivendi who have been unimpressed over the operator’s declining financial performance. Vivendi wants to replace TIM CEO Luigi Gubitosi after a 40% fall in TIM’s market value over the last three years. 

As the boardroom war drags on, the most likely way that TIM will change ownership is from a private equity takeover according to Jacques de Greling, director at research firm Scope Ratings.

Private equity-backed M&A deals have reached $1 trillion globally in 2021, which is 53% above the all-time yearly record of $663 billion of 2007 according to Refinitiv data.

De Greling adds that the company could be entering a new phase in its ‘troubled’ recent history but recent similar developments led by Xavier Niehl and Patrick Drahi who have taken private the holding companies of leading French operators Free and SFR in the past year could provide hope that a deal can be agreed.

“Telecom Italia’s management is under intense pressure to turn around the business after two recent profit warnings, with the stock price trading at less than half that at which Vivendi SA, the company’s biggest single shareholder with a 24% stake, bought into the group,” de Greling said. 

“For this deal to go through, KKR will have to win over Vivendi’s controlling shareholder Vincent Bolloré, and the Italian government – which has a golden share and an indirect 9.8% stake through Cassa Depositi e Prestiti - for whom Telecom Italia’s network infrastructure remains a strategic asset,” he says.

And despite Italy’s telecoms market remaining “challenging”, with little sign that a long period of declining growth is coming to an end, de Greling says KKR remains well-positioned in Italy, pointing to the recent acquisition of a 37.5% stake in FiberCop, the unit holding Telecom Italia’s last-mile network in 2020.