Defending its management of Telecom Italia (TIM), Elliott stated TIM’s board has only partially adopted its recommendations. Vivendi, TIM’s top shareholder, and Elliott have fought to control Tim’s board. In the article below, Elliott defends its stands and points out what needs to be done to further boost TIM’s market valuation.
On Monday, activist investor Elliott Management struck back at Vivendi saying it had not promised to double Telecom Italia’s (TIM) share price within two years but had instead offered “an assessment of the upside potential” of the stock over the medium-term if some of its proposals were executed by an independent board.
Vivendi, which has a 24% stake in TIM, had stated, TIM’s management had been “disastrous” since Elliott had wrestled control over the board from the French media group in May 2018. Vivendi had stated, since then TIM’s share price had depreciated by 35% in contrast to Elliott’s promise of doubling TIM’s share price within 2 years.
Besides a governance overhaul, Elliott had proposed a spin-off and partial sale of a soon-to-be-created network company, a conversion of savings shares, a return to dividends and asset sales.
“To date, the board has not adopted any of those recommendations. Instead, the board has thus far adhered to Vivendi’s own approach,” said Elliott.
Vivendi officials could not immediately be reached for comment.
As of 1102 GMT, TIM’s shares were up by 3% at 0.54 euros and were seen outperforming a 2.2% rise in Milan’s blue-chip index.
According to an investor, Elliott’s note suggests that the activist hedge fund could potentially push for strategic changes at TIM, which is likely to significantly lift the stock. Shares in European telecoms firms were also helped by a positive Deutsche Bank report on the sector.
According to Elliott, Vivendi had “fallen prey to the ‘short-termism’ it has previously decried”, casting judgment on the new board just four months after it was appointed. “If Vivendi now takes the view that fresh ideas are needed, Elliott would welcome its help in promoting value-creative solutions at the board level”.