AT A GLANCE: Elliott, Vivendi in Telecom Italia Tug-of-War
23 Março 2018 - 01:11PM
Dow Jones News
By Pietro Lombardi and Marc Navarro Gonzalez
THE NEWS:
Telecom Italia SpA's (TIT.MI) Chairman Arnaud de Puyfontaine and
other board members resigned on Thursday, forcing a complete
reshuffling of the board.
The resignation comes amid a power struggle between shareholder
Vivendi SA (VIV.FR) and activist investor Elliott Management, which
recently built a minority stake in the Italian company. The
resignations are effective before an April 24 shareholders meeting,
and Telecom Italia has called another shareholders meeting for May
4 to appoint a new board.
On Friday, Elliott called the resignations an attempt to delay
acting on its proposed changes for Telecom Italia.
THE RATIONALE:
Elliott has built a stake of more than 5% in Telecom Italia and
is pushing for a management shake-up and strategic changes. It
cites strategic missteps, weak share performance, corporate
conflicts of interest and governance failings as its
motivation.
Telecom Italia operates "an outstanding collection of assets
that, if properly managed, should produce substantial, consistent
returns," the fund wrote in a letter to shareholders on March 16.
It has proposed candidates to replace board members representing
Vivendi, and also wants Telecom Italia to sell part of its network
operation and dispose or sell part of subsea cable unit
Sparkle.
VIVENDI'S DEFENSE:
Vivendi, which holds almost 24% in Telecom Italia, has said it
would examine Elliott's ideas with an open mind but questioned
whether its plan would create value. Outgoing Telecom Italia
Chairman Arnaud de Puyfontaine is Vivendi's CEO, and the French
company had proposed a majority of Telecom's board members.
Telecom Italia recently approved the 2018-20 strategy focused on
convergence and content, and the separation of its fixed-access
network into a separate legal entity known as Netco, 100%
controlled by Telecom Italia.
WHAT'S NEXT:
Jefferies says the resignations are a tactical response aimed at
keeping Vivendi as a long-term presence on the board and will have
the effect of delaying a shareholder vote on board composition.
They also imply that Elliott's proposal to remove some directors
was likely to succeed. Elliott remains well placed to ensure the
board isn't controlled by Vivendi after May 4, according to
Jefferies.
Bryan Garnier says Vivendi may be trying to spur key
shareholders to question Elliott's strategy and get its own
candidates chosen again when the new board is appointed on May 4.
The Italian government backs Elliott's strategy, especially the
idea of listing the fixed-access network, and the current turmoil
could force Vivendi to adopt a more aggressive stance on the issue,
according to Bryan Garnier.
Berenberg expects local investors to dissociate themselves from
Elliott and present their own slate of independent directors at the
next AGM, adding that Vivendi's representatives' resignations from
Telecom Italia's board will likely make it harder for Elliott to
get support from Italian investors.
(END) Dow Jones Newswires
March 23, 2018 11:56 ET (15:56 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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