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Elliott Management ramps up campaign to shake up firms; Telecom Italia is latest

By Eric Sylvers in Milan and Ben Dummett in London 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 17, 2018).

Elliott Management Corp., the American activist fund, is on a tear in Europe.

Capping a series of big investments in the continent over the past two years, Elliott this week launched a proxy fight at Telecom Italia, the one-time state-owned telecommunications giant.

Elliott has disclosed a 3% holding and nominated a slate of directors to replace six current board members, including the company's chairman. It wants the carrier to simplify its shareholder structure, start paying a dividend and sell or spin off two of its businesses.

Elliott has also inserted itself in the chess match playing out between 21st Century Fox Inc., Walt Disney Co. and Comcast Corp. over British TV giant Sky PLC. Rupert Murdoch's Fox is trying to consolidate ownership of Sky. Disney has separately agreed to buy a big chunk of Fox assets, including Sky. Comcast joined the fray in February, promising a higher price for Sky in its preliminary offer.

Amid all that deal making, Elliott quietly swooped in, building about a 2.5% stake in Sky. It joined a group of hedge funds who have flooded in amid signs a bidding war was emerging. Elliott hasn't commented on the stake, but in the past has used such investments to agitate for a higher price from suitors.

In the Netherlands, Elliott has built a big stake in paint giant Akzo Nobel NV, pushing it in 2017 to consider marrying up with U.S. rival PPG Industries Inc. Akzo ultimately resisted the effort, but agreed to a number of Elliott demands in the process -- including shedding its specialty chemicals business.

Elliott is also pushing mining giant BHP Billiton Ltd., listed in both London and Australia, to shed assets and restructure. BHP agreed to sell its U.S. shale business and more recently signaled its willing to consider changes to the company's structure that Elliott has demanded.

Activist investors aren't a new thing in Europe, but they ratcheted up campaigns dramatically in 2017, according to Katherine Moir, a mergers and acquisitions partner at global law firm Clifford Chance. Elliott has stood out as "a key player and at the more disruptive end of the spectrum," Ms. Moir said.

Elliott's European forays have been largely led by Gordon Singer, the son of Elliott founder Paul Singer, and a group of managers based in London. Elliott has been active overseas for years, but recently ramped up its public campaigning in Europe. Its approach -- often backing up demands for change with threats to oust management and directors -- contrasts with what has typically been quieter campaigns by many peers on the Continent. It declined to comment specifically about its strategy.

Though it ultimately lost in its effort to force Akzo Nobel into PPG hands, Akzo agreed to appoint two board members backed by Elliott. It won two board seats at British investment manager Alliance Trust PLC in 2015. The same year, the hedge fund won three board seats at Ansaldo STS, an Italian maker of railway signaling equipment. That move is part of an effort to push Hitachi Ltd. to raise the price it has offered Ansaldo to consolidate its ownership.

Elliott has gone after Telecom Italia before. Back in 2001, it successfully blocked the company's bid to buy back nonvoting shares at a discount.

This week, Elliott struck again. In a letter made public Friday and addressed to all Telecom Italia shareholders, the fund proposed the ouster of several directors, including its chairman, Arnaud de Puyfontaine. Mr. de Puyfontaine is also chief executive of Vivendi SA, which owns 24% of Telecom Italia. Elliott is asking the company to sell or spin off its Italian network business and its undersea cable unit.

Vivendi said it would examine Elliott's demands "with an open mind." But the company also said "it is not sure that the plan to dismantle the Group and destabilize the teams will create value."

Telecom Italia declined to comment.

Write to Eric Sylvers at eric.sylvers@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

March 17, 2018 02:47 ET (06:47 GMT)

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