business

Elliott Says Billionaire's Arrest Clouds Telecom Italia Fight

  • Singer’s fund battling Vivendi for control of telecom company
  • Vivendi’s biggest shareholder, Vincent Bollore, facing charges

Elliott Management Corp. is “deeply troubled” by the arrest of Vivendi SA’s biggest shareholder, Vincent Bollore, and said it would find it difficult to reconcile a vote for the French media company’s slate at Telecom Italia SpA.

The billionaire and two others were charged by French investigators Wednesday as part of a probe into the possible use of bribes in two African countries to obtain port contracts from public officials. Bollore SA has a 20 percent stake in Vivendi, which is the largest holder in Telecom Italia with its 24 percent stake.

Elliott, the New York-based hedge fund run by billionaire Paul Singer, blames the Vivendi-controlled board at Telecom Italia for that company’s flawed strategy and share performance.

“We have been deeply troubled by recent allegations of corruption involving Vincent Bolloré and presidents of two different African countries, which resulted in Bolloré being held in police custody for questioning and criminally charged,” Elliott said Thursday in a letter to shareholders obtained by Bloomberg.

Elliott said Bollore’s arrest adds to its concerns about Telecom Italia’s governance and the issues it has already raised about business dealings among Vivendi, Bollore and Telecom Italia. It said those dealings have created a “cloud of distrust and suspicion.”

“While we await more clarity on this specific case, this is just the latest instance of a troubling track record of conflict, self-interest, and even graver issues of potential criminality by those who would purport to ask for our trust in guiding TIM,” Elliott said in the letter. “We find it hard to reconcile a vote for the Vivendi slate while also proclaiming to champion good governance.”

Bollore “remains presumed innocent” as the investigation continues, Bollore SA has said. In France, charges are announced prior to any decision on whether to refer the case to trial and can be dropped later.

A Vivendi representative wasn’t immediately available for comment after regular business hours.

Elliott Proposal

Elliott, which owns about 8.9 percent of Telecom Italia, has pushed for the separation and sale of part of the company’s grid -- with Telecom Italia keeping a stake -- and the sale of part or all of the subsea-cable division, as well as advocating debt reduction and the reintroduction of a dividend.

The fight is coming to a head with a special shareholder meeting set for May 4 in which both Vivendi and Elliott will put forth a slate of 10 directors for shareholders to vote on. Elliott has won the support of two prominent proxy advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., which urged investors to support its slate of nominees.

Under Italian law, the way each investor votes will be made public within 30 days of the meeting.

Vivendi Slate

Vivendi accused Elliott earlier Thursday of being inconsistent in its support of Telecom Italia Chief Executive Officer Amos Genish while contesting his strategy for the company. Vivendi urged shareholders to vote for its slate, which includes Genish.

“The Vivendi slate led by Amos Genish comprises a group of individuals who are extremely well equipped to continue the progress achieved at Telecom Italia over the past months and which has already begun to bear fruit,” Vivendi said in a statement.

Elliott reiterated its support for Genish in its letter.

Prior to his arrest Wednesday, Vincent Bollore said he was stepping down as chairman of Vivendi and passing the reins to his son, Yannick Bollore. Bollore’s resignation follows his exit this month from the board of pay-TV operator Canal Plus, a Vivendi subsidiary.

— With assistance by Gaspard Sebag, Daniele Lepido, and Tommaso Ebhardt

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