New York Wins In Italy's Battle of the Billionaires

(Bloomberg) -- Paul Singer’s Elliott Management Corp. has won the battle with Vincent Bollore’s Vivendi SA over Telecom Italia SpA. If Bollore is sensible, he will reach a truce rather than seeking to fight a full war.

At a meeting in Milan, investors in the Italian carrier voted for a board that will consist of 10 directors nominated by hedge fund activist Elliott, and five picked by Vivendi, the French media conglomerate that is the biggest shareholder.

In the minutes before the vote started, a Vivendi spokesman was still telling reporters that it intended to ensure that CEO Amos Genish’s plan for Telecom Italia wouldn’t change even if the Elliott slate won. Given that the hedge fund had promised to continue his agenda anyway, that smacks of face-saving bravado.

The loss is a blow to the credentials of Bollore, an imperious French investor whose family controls Vivendi through a minority stake. Infamous for his disregard toward corporate governance norms, Bollore’s backers nonetheless point to his record in generating returns for investors in his time at the top of Vivendi. He hasn’t been able to replicate that at Telecom Italia, whose shares have languished in the three years since he became involved. Investors have had enough.

After efforts to create a three-way content alliance with Italy’s Mediaset Spa foundered, Vivendi’s best bet now is to consider itself a financial investor in Telecom Italia. With that in mind, Bollore should bury the hatchet with Elliott and find a way to collaborate effectively.

The Breton billionaire has shown in the past that he’s intensely pragmatic when it comes to money, and his clumsy efforts to create a southern European media powerhouse have seemed out of character. He lost a similar battle trying to combine British advertising group Aegis with his own company Havas, but simply re-categorized the holding as a purely financial stake and made a chunky return in the end.

CEO Genish’s turnaround plan, backed by both sides, would certainly benefit from board consensus if it’s to succeed. Vivendi, with its voting power, could still call a shareholders’ meeting every 45 days to alter the board’s composition. But that would more likely just irk minority shareholders than anything else.

The Telecom Italia shares jumped into positive territory after the vote. If Vivendi wants to capitalize on its 4 billion euro stake in the carrier, it should let management execute a plan that combines the best of the activist investor’s suggestions (selling a minority stake in the network business, divesting the infrastructure division) and Genish’s plan to pivot toward digital services.

Humble pie may not be Bollore’s favorite dish, but a slice would be to his benefit.

©2018 Bloomberg L.P.

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