Poste relaunches its takeover bid for Tim: an 18 per cent increase in the value of the cash component and a waiver of the minimum acceptance threshold

Trading on the Milan Stock Exchange had begun with the news that TIM’s CEO Pietro Labriola and other senior managers with strategic responsibilities within the group had accepted the public takeover bid, which concluded last week. The TIM press release announcing this notes that the offer price had already been deemed financially fair by the group’s board of directors, which had assessed its rationale and industrial prospects favourably. This was a significant move at the start of the final week of the offer – the decisive week for acceptances – as hedge funds typically wait until the very last moment to tender their shares.

Last Friday, Telecom closed at €7.75, representing a premium of 2.78 per cent over the terms of the public takeover bid, with a valuation 0.2158 euros higher. Yesterday, both shares immediately began to slide, with Poste losing nearly 5 per cent by midday, whilst Telecom hit its low – down by the same amount – an hour before the close of trading. At the close, Poste stood at €26.25, down 2.42 per cent, and Telecom at €7.474, down 3.56 per cent. The latter’s premium over the offer price narrowed to just over 1 per cent, equivalent to €0.08 in absolute terms.

Arbitrage has likely played a role in the performance of the two shares. The bulk of the offer consists of an exchange of shares in two companies of a different nature. Funds specialising in telecoms will, logically, have taken advantage of Telecom’s high share price to realise their gains, given that following the announcement of the public takeover bid, the telecoms company’s share price – which had been trading at less than 6 euros – rose to exceed even 8 euros. Arbitrageurs were partly responsible for buying up the shares.

The decline in Poste’s share price was partly due to a report by Kepler which predicts, following the merger of the two companies, the creation of a “conglomerate”, with two distinct categories of investors – financial and telecoms – differing from the current bancassurance mix. For this reason, Kepler’s analysts have decided to apply a discount to the share’s valuation, whilst making it clear that this does not constitute a judgement on the merits of the transaction. The target price would be €25.50 if the deal were to fail, €27.50 if Poste Italiane were to acquire between 67% and 90% of TIM’s share capital, and €28.60 for a stake exceeding 90%, ultimately betting on the likelihood that the bid will succeed by a wide margin, with a target price of €28 – a ‘discount’ compared to the previous target of €29.5.

Analysts are not considering the option of retaining Telecom shares in their portfolios, as, once the public takeover bid has been completed, there is a risk that share prices will fall, given that the current valuation is ‘full’ and implicitly incorporates very high multiples on the domestic market, which remains challenging.