Italy Is Said to Probe Vivendi's Telecom Italia Board Exits

(Bloomberg) -- Italy’s market watchdog is investigating last week’s resignation of seven Telecom Italia SpA directors, according to people familiar with the matter, complicating the latest move by Vivendi SA and its billionaire Chairman Vincent Bollore against Paul Singer’s Elliott Management Corp.

The regulator, Consob, is also examining the decision by independent directors to exit the board alongside official Vivendi representatives and what that signifies about control of the carrier by the French media conglomerate, said the people, who asked not to be identified as the investigation isn’t public.

Chairman Arnaud de Puyfontaine and six other directors on March 22 announced they will step down, the latest development in a battle for influence at Telecom Italia between activist fund Elliott and the carrier’s largest shareholder, Vivendi. With the departures, a vote on the board’s composition was delayed to May 4 from April 24, portending more than a month of wrangling between Bollore -- who wants to keep the company together -- and the New York-based hedge fund -- which is pushing to break it up.

Vivendi, which has a 24 percent stake, last year acknowledged its influence at Telecom Italia, but said it has just "direction and coordination" over the Italian company, not full control of the board.

Spokesmen for Consob and Telecom Italia declined to comment.

Elliott Management, which has built a 5.75 percent stake in the former phone monopoly, earlier this month demanded that de Puyfontaine and five other members of the board backed by Vivendi be replaced.

Elliott is prepared to run a slate of at least 10 directors at the meeting in May, a person familiar with the matter said last week. 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.

Consob began reviewing Vivendi’s influence at Telecom Italia last year and in September determined the French company controls the carrier, which Vivendi disputed. The regulator’s finding could allow it to force Vivendi to take on part of Telecom Italia’s debt and could give a government committee the basis to invoke its “golden power” over the carrier, gaining the authority to force the potential sale of assets of national interest, such as wholesale unit Sparkle.

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