Elliott Wins Clash for Telecom Italia’s Board, Beats Vivendi

(Bloomberg) -- Elliott Management Corp. defeated Vivendi SA to take control of Telecom Italia SpA’s board after shareholders supported the U.S. activist investor’s call to improve corporate governance and push for asset sales.

The slate put forward by the New York-based hedge fund run by billionaire Paul Singer beat Vivendi’s proposal, garnering the support of 49.8 percent of votes at the Italian carrier’s extraordinary general meeting on Friday in Rozzano, near Milan. Vivendi’s slate garnered 47.2 percent of the votes.

The loss of board control is a blow to Vivendi’s biggest shareholder Vincent Bollore, the latest in a string of public and personal setbacks for the French billionaire. It’s a milestone for Elliott -- the first proxy win in its four decades in operation.

Telecom Italia shares rose as much as 1.6 percent and were up 0.4 percent at 4:37 p.m., giving the company a market value of 17.2 billion euros ($20.6 billion). The stock has gained over 15 percent since Bloomberg News first reported that Elliott was building a stake on March 5.

Different Priorities

Singer and Bollore have pushed different priorities for the former phone monopoly. Elliott has called for the sale of assets to cut debt and reintroduce a dividend. Vivendi has rejected Elliott’s vision and is focused on investing in digital content and regaining the investment-grade credit rating.

Elliott, with about 8.9 percent of the stock, says the carrier has suffered under the influence of Vivendi, the biggest shareholder with 24 percent.

The result means Elliott’s 10 director nominees will join the board and Vivendi gets the remaining five spots. Among Vivendi-backed directors who will join are Telecom Italia Chief Executive Officer Amos Genish and Vivendi CEO Arnaud de Puyfontaine.

“Today’s landmark vote represents a victory for all shareholders and opens a new chapter for Telecom Italia, in which the company can build upon a foundation of improved governance to secure sustained value creation for all stakeholders,” Elliott said in a statement.

Read more on Singer’s first major proxy win here

Vivendi reaffirmed its long-term commitment to the company and its backing of Genish in a statement and said it would “take all measures necessary to preserve its value and avoid its dismantling.”

Italian state lender Cassa Depositi e Prestiti SpA, with a 4.9 percent stake, was crucial in helping Singer’s activist fund win by voting for its slate. It backs Elliott’s proposal for a full separation of the carrier’s landline network and supported the effort to improve governance, according to people familiar with the reasoning.

Vivendi criticized CDP’s involvement, arguing that a state-owned firm shouldn’t intervene in the fate of a private company.

Strategy Compromise

The result is likely to force a compromise between the two sides on strategy. Vivendi, with its voting power, could call a shareholders’ meeting every 45 days to alter the board’s composition.

Genish, the fourth de facto CEO at Telecom Italia in less than three years, may be key to building a bridge between Elliott and Vivendi. The 57-year-old Israeli appointed by Vivendi has already won the approval of Elliott and received the backing of 98 percent of votes at last month’s annual general meeting.

After Elliott’s slate won at the meeting, some investors cheered and applauded the result. They were rebuked by Franco Bernabe, who was deputy chairman and part of Vivendi’s slate but will not make it onto the new board.

“We are not at the stadium, we are not in the fans section,” Bernabe said.

Fulvio Conti, who was elected on Elliott’s slate, was among those celebrating. Conti, 70, former head of Italy’s largest utility Enel SpA, is the top candidate to be appointed chairman at the Monday board meeting, according to people familiar with the matter.

“We are satisfied. Now Telecom Italia is a real public company,” Conti said.

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