May 4, 2018 / 6:00 AM / 17 days ago

Vivendi, Elliott set to clash in Telecom Italia board seat battle

* Telecom Italia shareholder meeting kicks off at 0900 GMT

* Winning slate will appoint two-thirds of TIM’s board

By Agnieszka Flak

ROZZANO, Italy, May 4 (Reuters) - Telecom Italia’s (TIM) top two investors will face off for the first time on Friday as they put their battle over board seats at the Italian phone group to a shareholder vote.

Activist fund Elliott has built a stake of 9 percent in the former state phone monopoly to try to shake up the way top investor Vivendi - which owns 24 percent - runs it.

The two investors have been at loggerheads for two months, with Elliott accusing Vivendi of serving only its own interests and the French media group saying the fund was looking only for short-term financial gains.

Since becoming a TIM shareholder in 2015, Vivendi has gradually tightened its grip on Italy’s biggest phone group and last year appointed two-thirds of its board as well as making its own CEO, Arnaud de Puyfontaine, executive chairman.

The hands-on approach has led to friction with Rome, concerned about an asset it considers of strategic importance, and has unnerved other investors at the telecoms group.

On Friday, shareholders are asked to pick between Elliott’s slate of 10 independent Italian business heavyweights and Vivendi’s list, that did little to allay governance concerns.

The vote was called after the majority of directors resigned in March, triggering a full reshuffle. Whoever secures the most votes will get two-thirds - or 10 seats - on the board, while the remaining five will come from the other slate.

Proxy advisers recommended backing Elliott’s list, saying Vivendi had been damaging for governance and investor returns.

But the vote is likely to be close given the size of Vivendi’s stake, and will depend on where big institutional investors place their bets.

Italian state lender CDP bought 4.8 percent of TIM, a move widely seen as political endorsement of the Elliott campaign, but what the likes of BlackRock and Vanguard might do is harder to predict, analysts and fund managers said.

Vivendi’s slate features CEO Amos Genish, who managed to impress the government in Rome and whose ambitious new three-year strategy, presented in March, was welcomed by investors and could sway the vote in favour of the French camp.

Last week shareholders nearly unanimously backed Genish who, despite being a Vivendi ally, is well respected for his track record in the telecoms industry and is seen as key to re-launching the slumbering Italian telecoms heavyweight.

This might prove a conundrum for some investors who may want to weaken the French grip but will not want to lose the CEO.

Genish has said his position would be “untenable” if TIM ended up with a board that did not back his strategy, prompting Elliott to reiterate its support for the CEO and his plans.

The activist fund also toned down its requests for major strategy moves, saying management and an independent board would evaluate whether and when to carry them out.

Regardless of who wins, other shareholders and analysts say Vivendi and Elliott will eventually need to bury the hatchet to allow the new board to push through measures to slash TIM’s debt, tackle growing competition and unlock value at a group that’s been underperforming peers for years.

Editing by Alexandra Hudson

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