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Activist investor wrests control of Telecom Italia board

Activist fund Elliott won its weeks-long power struggle with Vivendi over Telecom Italia by wresting control of the company's board at a shareholder meeting held near Milan on Friday.

Activist investor wrests control of Telecom Italia board
Telecom Italia (TIM) faced a crunch vote over board members. Photo: Miguel Media/AFP

US-based Elliott scraped past Vivendi, with 49.84 percent of voting shareholders' ballots going in the fund's favour and 47.18 percent of votes for the French telecommunications giant, which is run by billionaire Vincent Bollore and is the largest shareholder in Telecom Italia (TIM) with a stake of just under 24 percent.

Elliott hailed it as a victory for an “independent slate,” but it is a big win for the fund, which has about nine percent of TIM's shares and has been pushing for change at the top at TIM ever since it demanded the removal of six board members in mid-March.

“Today's win for the independent slate sends a powerful signal to Italy and beyond that engaged investors will not accept substandard corporate governance,” the fund wrote in a statement following the vote, in which over 67 percent of TIM's capital took part.

It will hold ten seats on the new board, with Vivendi given the remaining five, a huge blow to the French group after having previously had a stranglehold on board positions.

Vivendi immediately responded to the defeat by insisting that it would work to ensure that Elliott, sometimes called a “vulture fund”, would not “dismantle” TIM.

“We have five seats on the board, we are the main shareholder and we will continue to support [director and general manager] Amos Genish's strategy, which was voted for unanimously by the board,” said Vivendi's head of communications Simon Gillham.

'Very bad shareholder'

Gillham added that Elliott's was “not a market-driven victory” and that they won thanks to state-controlled entity Cassa Depositi e Prestiti, which holds a 4.7 percent stake in TIM and “made the difference by voting for a hedge fund instead of an industrial long-term shareholder”.

The Italian government has repeatedly criticized Vivendi's management, and tensions have often been high between Rome and the French group.

“Vivendi has been a very bad shareholder,” Economic Development Minister Carlo Calenda said in April. “I am in favour of foreign investment, but that does not mean remaining dormant when they [want] to destroy the value rather than to create it.”

Calenda's criticisms mirror those of Elliott, who have lamented TIM's performance ever since “Vivendi nominees” joined the board in December 2015.

The fund has castigated governance issues and “conflicts of interest” such as TIM's January 2017 awarding of an advertising contract to Havas, which is owned by Vivendi, worth a rumoured €100 million.

The charges filed last week against Vincent Bollore, CEO of the Bollore group that owns Vivendi, in connection with the awarding of two lucrative port concessions in West Africa, was for Elliott the “latest example” of the problems posed by Vivendi.

Elliott's ten nominees, all well-known to the Italian business community, include Luigi Gubitosi, current extraordinary administrator of failing airline Alitalia, and Fulvio Conti, former CEO of Enel. Conti will be TIM's new chairman.

Genish, who is close to Bollore, said on Sunday that his position would be untenable should Vivendi lose, but Elliott reiterated the support it showed the general manager in TIM's previous shareholders meeting last week.

“Elliott remains fully supportive of CEO Mr. Amos Genish and the entire management team and is fully aligned with Mr. Genish's business plan,” it wrote.  

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BUSINESS

EU finds Italy’s Alitalia loans ‘illegal’ but airline free to keep money

The EU's antitrust authorities ruled Friday that Italy's 900 million euro loans to long-struggling airline Alitalia were "illegal", but cleared the country's new carrier to get state funding and avoid paying back the money. 

Ahmad AL-RUBAYE / AFP
Ahmad AL-RUBAYE / AFP

“Following our in-depth investigation, we reached the conclusion that two public loans worth EUR 900 million granted by Italy to Alitalia gave the company an unfair advantage over its competitors, in breach of EU State aid rules,” said EU competition chief Margrethe Vestager said in a statement.

“They must now be recovered by Italy from Alitalia to help restore a level playing field in the European aviation industry.”

But the authorities in Brussels simultaneously said new flag airline ITA – set to start flying next month – was not liable to reimburse the money and that 1.35 billion euros being injected into the firm by Rome did not breach state aid rules.

“Italy has demonstrated that there is a clear break between Alitalia and the new airline ITA, and that its investment in ITA is in line with terms that a private investor would have accepted,” Vestager said.

“Once ITA takes off, it is for Italy and ITA’s management to make use of this opportunity once and for all. And we will continue to do our part to ensure fair competition in the European aviation sector.”

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Loss-making Alitalia was placed under state administration in 2017 but Italy has struggled to find an investor to take it over. The situation was only exacerbated by the coronavirus pandemic that grounded airlines worldwide.

The Italian government gave the company two loans for the amount of EUR 600 million and EUR 300 million in 2017, as Alitalia scrambled for liquidity without access to the debt market.

Earlier this year Italy said it had reached an agreement with the European Union for a bailout that creates a new debt-free company to take over some of Alitalia’s assets – ITA.

The board of directors of ITA last month approved a binding offer for 52 of Alitalia’s aircraft, related airport slots and other assets.

The Italian government has created a 100-million-euro ($117-million) fund to reimburse Alitalia customers.

Italy provided state loans to Alitalia totalling 1.3 billion euros between 2017 and 2019.

In July, it approved another 700 million euros for ITA.

Further sums are expected in 2022 and 2023, bringing the total to 1.35 billion euros.

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