Battle over Telecom Italia

in #market6 years ago

US hedge fund in showdown with Vivendi over Telecom Italia
ROZZANO, Italy — Telecom Italia shareholders vote Friday whether the activist hedge fund Elliott Management has the power to revamp the board against the controlling stakeholder, French entertainment group Vivendi, in a dramatic showdown that will determine the future of the former Italian monopoly.

The battle over control of Telecom Italia has intensified in recent weeks, with the Italian government's investment arm taking a 5 per cent stake in April, citing the company's strategic importance, and broadly aligning itself with Elliot.

Elliott revealed its stake, currently at around 9 per cent , earlier this year, saying it wanted to shake up the board as part of a strategy to increase shareholder value, which has lost a third of its value since Vivendi became the controlling shareholder in 2015. Elliott has proposed a list of board members including well-known Italian business leaders to replace members close to Vivendi.

Telecom Italia's shares were down 0.8 per cent to 0.83 euros Friday while the board's future was being debated.

Elliot's aim is to separate Telecom Italia from the network infrastructure, which is in line with the government's view and could allow an independent company controlled only by Italian investors. Vivendi, which controls just under the 25 per cent threshold that would trigger a takeover, is reluctant to spin off the network, which is the money-generator at the heavily indebted company.

The Italian government last year exercised its "golden power," the right to protect Telecom Italia, amid concerns over the French company's control of Telecom Italia's Sparkle undersea cable division and Telsy, which provides encrypted communications technology to the Italian military and government. The government decree requires a board member who is Italian and holds a security clearance to handle matters significant to national security.

Telecom Italia has lost more than a third of its market value since Vivendi's arrival in 2015 with the aim of taking over also Silvio Berlusconi's Mediaset to create a big media holding. That Mediaset deal has fallen in dispute, and analyst Carlo Carnevale Maffe said Vivendi's major error was not courting officials with their strategy.

"They penetrated at nighttime, and they occupied. This is perfectly legal and perfectly justified," said Maffe, a management professor at Milan's Bocconi University. "But if you want to buy a major telco and the biggest private media company, you need to knock on the door and at least ask permission."

Colleen Barry, The Associated Press