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Telecom Italia shares fall despite power grid deal
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Main investor Vivendi threatens to challenge deal
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Deal would be new start for debt-ridden former monopoly
(Updating actions and adding possible legal proceedings to paragraphs 3-5) by Elvira Pollina
Shares of Telecom Italia (TIM) TLIT.MI slipped on Monday after investor Vivendi VIV.PA threatened a legal challenge to the former phone monopoly’s plan to sell its network in a deal of 19 billion euros ($20.4 billion).
The sale to KKR would make TIM the first telecommunications group in a major European country to divest itself of its landline network, and is a key part of TIM chief executive Pietro Labriola’s plan to revive the debt-ridden group. debts.
TIM has said it wants to close the deal by next summer, but hopes for a smooth restart of the long-troubled telecommunications company have been clouded by opposition from Vivendi, which holds a 24% stake in TIM.
Vivendi, which has repeatedly expressed its reservations about the terms of the deal with KKR, said late Sunday that it considered the decision to proceed without a shareholder vote to be “illegal” and that it would use “all the legal means at its disposal to contest this decision.
In a statement Sunday announcing the board’s choice, TIM said it had listened to legal and financial advice.
The French media group has lobbied for a higher sale price and also questioned the viability of what will remain of TIM once the network is sold.
Vivendi, a company listed on the Paris stock exchange and facing a 75% loss on its initial investment of 4 billion euros in TIM, criticized the decision to proceed with the sale without an extraordinary meeting of shareholders and without dissident investors have the possibility of reselling their shares to the company.
According to two sources familiar with the matter, Vivendi now expects to file a complaint with a Milan court to challenge the board’s decisions.
RETIREMENT OF SHARES
After an initial 5% rise, TIM shares reversed course and moved away from their lowest levels, but were still down around 3% at 16:20 GMT, reflecting fears of legal proceedings prolonged.
Investors should also keep in mind that Vivendi has fought a lengthy legal battle in courts across Europe with the Berlusconi family’s Mediaset company, now known as MFE-MediaForEurope MFEB.MI, over ‘a pay TV deal that fell through in 2016.
To oversee an asset deemed of national strategic importance, the Italian Treasury plans to spend up to 2.2 billion euros to take up to 20% of the network after its sale to KKR, which is already a minority investor in the network.
Economy Minister Giancarlo Giorgetti downplayed the threat to the deal.
“We made an offer and the TIM board accepted it. It is obvious that the shareholders have their rights and that they will exercise them in the appropriate forums, but this agreement is planned,” he said. he told the press on Monday.
TIM’s board approved the sale with 11 directors in favor and three against, after meetings that stretched from Friday to Sunday evening.
Vivendi representatives left TIM’s board of directors in January after a series of unsuccessful negotiations with the government over the future of the telecommunications group.
The sale would allow TIM to reduce its financial debt by around 14 billion euros. TIM, which needs cash, would also shed half of its 40,000 domestic employees and focus on its services business.
The sale price of 18.8 billion euros including debt could reach 22 billion euros if certain conditions are met, TIM said.
TIM tasked its Managing Director, Mr. Labriola, to seek a better solution for its Sparkle subsea unit (). Sources said KKR valued the company at around €650 million, while TIM is seeking a price of around €1 billion.
($1 = 0.9306 euros)