Vivendi Gains Telecom Italia Board Seats in Bollore Victory

  • Vivendi sought influence while avoiding dilution of its stake
  • Succeeded in blocking Telecom Italia stock conversion

Vivendi SA won a vote of shareholders in Telecom Italia SpA to gain four board seats and succeeded in blocking a management-supported stock conversion, avoiding a dilution of its stake as it seeks more influence over Italy’s largest carrier.

About 53 percent of votes were for Vivendi’s motion to boost the number of directors to 17 from 13, officials said at the meeting Tuesday in Rozzano, near Milan. About 56 percent of the phone company’s shares were represented at the assembly and the proposal needed a majority of those to pass. Vivendi Chief Executive Officer Arnaud De Puyfontaine is among the French media company’s director nominees.

Earlier in the session, Vivendi succeeded in blocking a stock conversion sought by Telecom Italia’s management. Representatives for the carrier had tried to rally other shareholders against Vivendi’s push for board seats, people familiar with the matter have said.

Vivendi’s billionaire Chairman Vincent Bollore has built up Vivendi’s stake in Telecom Italia over recent months with the goal of divesting assets and potentially playing a part in the long run in pan-European telecommunications consolidation, people familiar with the matter have said. Vivendi owns about 20.5 percent of Telecom Italia and is open to raising its stake to almost 25 percent, people have said.

French Billionaires

The power struggle is set to have implications for Telecom Italia units such as its Brazilian business. Vivendi and Telecom Italia CEO Marco Patuano have different visions for the future of Tim Participacoes SA, Telecom Italia’s Rio de Janeiro-based unit, people with knowledge of the matter have said.

Bollore isn’t the only French billionaire angling for influence at Telecom Italia. Xavier Niel, the founder of broadband provider Iliad SA, has acquired securities equivalent to a holding of about 15 percent in the Italian carrier through his personal investment company. This month, JPMorgan Chase & Co. also boosted its stake and owns a holding equivalent to 10.1 percent.

Until earlier this year, Telecom Italia had been controlled by Spain’s Telefonica SA and a group of Italian financial investors. Their replacement by the two French shareholders comes as Patuano seeks to revive the company’s local business and sell assets to reduce a debt load of almost 27 billion euros ($29.7 billion).

The issue of having directors from a competitor on Telecom Italia’s board will be reviewed by the company’s legal department, Chairman Giuseppe Recchi told reporters after the meeting. Investors today rejected a proposal by Vivendi that would free its representatives from having to sign non-compete clauses. The four Vivendi executives will join a Telecom Italia board meeting scheduled Wednesday, he said.

Stock Conversion

In the share-class conversion, Telecom Italia was seeking an exchange of the savings stock -- a type of securities dating back to the 1970s -- by a voluntary one-for-one swap. The move could have raised about 570 million euros in proceeds, because holders of those shares would have to pay a cash conversion fee of 9.5 euro cents, representing about half of the difference in values between the two share classes.

“We lost an opportunity for the company,” Recchi said. The company’s new board will review the conversion project in the future, he said.

Savings stock account for almost one-third of Telecom Italia’s share capital, and its conversion into voting shares would have diluted the voting stake of shareholders including Vivendi. In Italy, savings shares don’t carry voting rights, but companies are required to pay a dividend to the holders every year.

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