Elliott Urges Change at Telecom Italia in Fight With Vivendi

(Bloomberg) -- Billionaire Paul Singer’s Elliott Management Corp. stepped up its campaign for a board overhaul at Telecom Italia SpA amid a deepening fight for dominance with the company’s biggest investor.

The New York-based activist hedge fund, which said it owns more than 5 percent of the Italian telecommunications provider, accused the company’s largest shareholder, Vivendi SA, of running it in a way that is counter to the interests of other investors.

“Poor stewardship under the Vivendi-controlled board has resulted in deeply troubling corporate governance issues, a valuation discount and no clear strategic path forward,” Elliott said Thursday in a letter to Telecom Italia. “We strongly believe that there could be material upside for shareholders if an independent board were to take steps to improve strategic direction and governance.”

Elliott said Telecom Italia should consider an initial public offering for its landline business, which the company has said will be spun off as a separate unit. The hedge fund is also criticizing numerous decisions by the company, including a contentious joint venture with Vivendi’s Canal Plus that has riled Italian regulators.

Vivendi said it will examine Elliott’s comments with an “open mind,” but added it’s not sure that the plan to “dismantle” Telecom Italia will create value. Chief Executive Officer Amos Genish’s industrial plan “is strong and promising for the future,” Vivendi said in an emailed statement.

Representatives for Telecom Italia declined to comment.

Vivendi’s foray into Italy in the past two years has drawn political and regulatory scrutiny. In September, the country’s stock market regulator determined that Vivendi has de facto control over the former phone monopoly. Paris-based Vivendi also received a reprimand from the watchdog for buying a stake in Mediaset SpA, the broadcaster founded by former prime minister Silvio Berlusconi.

Vivendi is locked in a legal battle with Mediaset after it backed out of a deal to buy Berlusconi’s pay-TV unit in 2016.

Uphill Battle

Elliott and Vivendi are set for showdown in Milan on April 24, when Telecom Italia investors meet at their annual meeting to vote on the hedge fund’s proposal to remove Chairman Arnaud de Puyfontaine and five other Vivendi-backed board members. It may be an uphill battle for Elliott and Singer because Vivendi owns 24 percent of the company.

“In addition to its evident multi-faceted governance shortcomings and multiple conflicts of interest, Vivendi’s actions have undermined its relationship with the Italian government and the telecoms regulator, both of which are severely detrimental for a regulated business,” Elliott said in the letter.

“There is a clear and overwhelming case for change,” according to the letter. “Elliott believes a board composed of truly independent directors is the most efficient and effective way to improve performance and governance.”

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