Singer Wins Telecom Italia Round as Bollore's Chairman Resigns
(Bloomberg) -- Activist investor Paul Singer won a round in his battle for influence at Telecom Italia SpA, with Chairman Arnaud de Puyfontaine and six directors backed by Vincent Bollore quitting the board.
The move gives Vivendi SA, the French media company chaired by Bollore, some time in its attempt to fend off Singer’s Elliott Management Corp. in a contest that’s likely to come to a head at a Telecom Italia shareholder meeting in May, when investors will vote on a new board of directors.
The announcement of the resignations late Thursday by Telecom Italia was accompanied by a decision to delay a vote on the board’s composition until the meeting on May 4 from April 24, promising more than a month of wrangling between Bollore, the French billionaire who wants to keep the company together, and the New York-based hedge-fund manager who’s pushing to break it up.
Elliott Management, which has built a 5.75 percent stake in the former phone monopoly, last week demanded the replacement of de Puyfontaine and five other members of the board backed by Vivendi, whose 24 percent stake makes it Telecom Italia’s largest shareholder.
Elliott is prepared to run a slate of at least 10 directors at the meeting in May, according to a person familiar with the matter. The hedge fund has spoken to dozens of potential candidates who are willing to put their names on its proxy and plans to run its slate against Vivendi’s at the meeting, said the person, who asked not to be identified because the matter is private.
“Unable to advance any meritorious arguments, the board has simply abandoned their posts to stall for time,” the hedge fund said Friday in a statement. “Elliott regards this action as cynical and self-serving, in that it delays the ability of Telecom Italia shareholders to express their votes at the upcoming AGM.”
Telecom Italia shares fell 0.8 percent to 77.4 cents at 12:40 p.m. in Milan.
Under Italian law, if the majority of a board resigns, it is dissolved. Each side can then present a slate of at least 10 directors for the company’s 15 member board. The side that wins the shareholder vote will be granted two-thirds of the seats on the board. The remaining third would go to the top five candidates on the opposing slate. Elliott is confident it can win against Vivendi’s slate, the person said.
“This represents a step-victory for Elliott,” Dhananjay Mirchandani, an analyst at Bernstein, wrote in an emailed note. “It does make an independent board more likely, although this will come down to Vivendi’s next move and shareholder attendance/voting at the next shareholder meeting.”
While the sweeping resignations point to a win for Elliott, the extra time before the vote on the board could also help Vivendi regroup for a another face-off.
In addition to de Puyfontaine, directors Camilla Antonini, Frederic Crepin, Felicite Herzog, Marella Moretti, Herve Philippe and Anna Jones gave notice that they would resign as of April 24. Giuseppe Recchi, the deputy chairman who announced his resignation in January and leaves with immediate effect, will have his duties regarding defense and national security taken up by former Telecom Italia CEO Franco Bernabe.
“I remain committed to the project we have undertaken to transform TIM and I am optimistic that with this step we will provide stability and support to our CEO, Amos Genish, and his management team, so that they can press on with creating value for all our stakeholders,” de Puyfontaine told reporters in Rome.
Elliott also remains supportive of Genish, the person said.
“In resigning, the aforementioned directors have expressed their hope that this move would help to clarify and provide certainty to the governance of the company, passing the responsibility of appointing the new board to the shareholders’ meeting pursuant to the current rule of law and the bylaws,” Telecom Italia said.
Elliott has increasingly bought into complex situations in Europe in which different factions are jostling for control. The fund has taken positions in pay-TV company Sky Plc, a target of both 21st Century Fox Inc. and Comcast Corp., as well as GKN Plc, the U.K. aerospace and auto-parts maker trying to repel hostile bidder Melrose Industries Plc.
At Telecom Italia, Elliott complained in a letter to shareholders last week about what it characterized as profound and persistent share-price underperformance, strategic failures, corporate-governance failures and conflicts of interest. Vivendi acquired its initial interest in Telecom Italia in 2014.
Elliott’s history of agitating at Telecom Italia dates back to 1999, when it rallied shareholders against then CEO Roberto Colaninno, whose plans for the company it opposed. In 2003, Elliott fought a plan for the carrier to merge with its parent company, Olivetti SpA.
This time, Elliott has pushed for the separation and sale of part of the company’s grid -- with Telecom Italia keeping a stake -- and the sale of part or all of the subsea-cable division, as well as advocating debt reduction and the reintroduction of a dividend.
Genish is already working to legally separate the grid to ease political concerns in Italy about French influence over an asset of national strategic interest, though Telecom Italia would still control the network. He said this month that an IPO could be an option later. A sale of Sparkle is now under consideration, Genish said.
Vivendi said Thursday in a statement that it supports Genish’s plan for Telecom Italia and its representatives on the board have resigned in “in light of the attempt led by hedge-fund activist Elliott Management, well-known for its track record of short-termist initiatives, to dismantle Telecom Italia.”
Vivendi has also been reprimanded by regulators for buying a stake in Mediaset SpA, the broadcaster founded by former Prime Minister Silvio Berlusconi, as the sides feuded over a pay-TV deal gone bad.
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