Vivendi has bought itself time to regroup and persuade Telecom Italia (TIM) shareholders to support its strategic plan for the telco by having its representatives on the TIM board resign on mass, triggering a re-election process and delaying a vote on the make-up of the board to May 4.
The move came in reaction to moves by activist investor Elliott Management to engineer Vivendi’s removal from the board and push through a new strategic plan that would see the company split off its infrastructure arm.
TIM chairman Arnaud de Puyfontaine and six other directors associated with Vivendi resigned. The resignation of a majority of the board means that the board has to be dissolved and re-elected under Italian law. The re-election will see the competing sides present rival slates of candidates for the board, with the winning side taking two thirds of the seats. Under Italian law, shareholders with over 0.5% stakes are permitted to present slates of candidates for the board.
While a victory for Elliott, the resignation of Vivendi’s representatives was accompanied by a vote to delay the re-election from April 24 to May 4, buying some extra time for Vivendi to persuade investors of the merits of its vision.
“In light of the attempt led by hedge-fund activist Elliott Management, well-known for its track record of short-termist initiatives, to dismantle Telecom Italia (TIM), the three members of the TIM Board of Directors representing Vivendi, which supports the unanimously approved industrial plan led by Amos Genish and his team, have decided to resign from the Board,” said Vivendi in a statement.
“As five other Board members have also decided to tender their resignations, resulting in a majority of the Board members having resigned, a shareholder’ meeting will be held in May to allow the TIM shareholders to appoint the Board members they want and which policy to follow.”
Elliott, which now controls over 5% of TIM’s shares, was quick to respond, accusing Vivendi of cynicism in delaying the day of reckoning after failing to come up with convincing arguments against its case that for the separation of the telco’s network arm, the whole or partial sale of its submarine cable arm and the resumption of dividend payments to shareholders.
“Given the momentum behind Elliott’s campaign at Telecom Italia to improve both performance and governance, Elliott was not surprised to see yesterday’s resignation of seven board members affiliated with Vivendi. Unable to advance any meritorious arguments, the Board has simply abandoned their posts to stall for time. Elliott regards this action as cynical and self-serving, in that it delays the ability of Telecom Italia shareholders to express their votes at the upcoming AGM,” the hedge fund said.
“This is yet another example of minority shareholder rights at Telecom Italia being abrogated and the continued disregard of corporate governance best practice. Finally, Vivendi should note Elliott’s forty-year track record of consistent value creation, and sustained, long-term commitments to expose poor governance and catalyse positive change; Elliott’s investment history in Telecom Italia dates back to 1999, well before Vivendi became a shareholder in the Company.”
TIM named Franco Bernabè as deputy chairman, with responsibility for activities and assets related to Italian national security, a position previously held by Giuseppe Recchi, who was among those resigning.