War of words between TIM and Vivendi

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Corporate statements tend not to be quite so brutal, and rarely can one read phrases such as “disastrous management”  – in this case uttered by Vivendi – towards Telecom Italia (TIM), with Vivendi adding: “The stock market performance is dramatic: TIM’s share price dropped about 35% since May 4, 2018, and is at its lowest level in five years while in its April 9, 2018 position paper, Elliott promised a doubling of the share price over the next two years.”

Elliott is the US activist hedge fund which back in May defeated Vivendi in something of a boardroom coup, and took control of telecom Italia with the stated intent of shaking up the business.  Elliott secured the appointment of 10 independent directors, and thus two-thirds of the seats on TIM’s board.

That plan seems to have gone awry with the share price at its lowest point for 5 years.  Vivendi adds: “The new governance team is failing: the spreading of rumors (including the departure of the CEO) is causing dysfunction that is harmful to the smooth operation and results of TIM.”

Telecom Italia responded saying that Vivendi’s accusations are “absurd and unfounded”.

Vivendi is the largest shareholder with a 24 percent stake.  There is a board meeting scheduled for next week (September 10th) which – no doubt – would easily qualify as a Pay-Per-View event for Canal Plus subscribers.

Deutsche Bank, in a note September 6th, says: “The upside [share price movement] would come from a successful turnaround of TIM under Elliott’s plan. Unfortunately, the most likely scenario looks to be somewhere between this and an on-going feud over control with both Elliott and Vivendi remaining holders and the appearance of strategic impasse for TIM. So we see the primary reasons to BUY Vivendi as centering on an undervalued Canal+ turnaround and scope for value crystalisation in UMG for sale.”

Analysts at Exane/BNPP said this was another negative twist to the never-ending Italian saga for Vivendi. “We still don’t see a clear strategy from TI, which is facing structural problems. As a reminder, at current market price level, TI represents less than EUR1.5 per share, ie less than 7% the market value of Vivendi.”


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