Vincent Bollore Backs Down. Investors Can Finally Exhale

(Bloomberg Opinion) -- Vincent Bollore has blinked. 

Vivendi SA, the French media conglomerate he controls, on Friday backed down in its battle with Elliott Management Corp. to control Telecom Italia SpA. It withdrew a motion which aimed to wrest control of the board from the activist investor.

After a year characterized by intransigence on both sides, it was a significant step toward ending a conflict that has seen shares in the former Italian national carrier lose more than a third of their value.

To some extent, the climbdown was symbolic. Vivendi, which has five of the 15 board seats, had called a shareholder vote to replace half of the remainder, all of whom are aligned with Elliott. But after all three major independent shareholder advisory groups recommended blocking the proposal, it was clear that the effort was going to fail.

That made the retreat a smart move on the French billionaire's part: he picked the lesser defeat. Had he lost the vote, it would have served to renew the mandate of the Elliott-nominated director slate, who ousted counterparts backed by Vivendi in a shareholder vote last year. That would have weakened the Bollore's negotiating position as he seeks a compromise – he wants more influence over a company in which he has invested 4 billion euros ($4.5 billion), while Elliott wants an end to destabilizing attempts to rejig the board.

Winning Friday's vote would have strengthened Elliott's hand, making it even harder for Vivendi to wring out concessions. One possibility would have seen each side take seven seats each. The fifteenth directorship might then have been a swing vote going to a nominee from Cassa Depositi e Prestiti, the state-backed lender which owns about 10 percent of Telecom Italia, and whose goals are similar to those of Elliott: namely, merging the carrier's network with smaller rival Open Fiber SpA.

The climbdown does, however, indicate that Bollore is willing to seek a middle ground which is workable for all parties. Bollore might be strong-willed, but he's not irrational. He's backed down on issues before, abandoning a creeping takeover attempt for Ubisoft Entertainment SA in 2017 after shares in the video gamemaker recovered.

I've long advocated a compromise over Telecom Italia, and it's overdue. The uncertainty created by the shareholder tussle has destroyed value at the carrier, which has often looked like an ill-treated child torn between two squabbling parents.

It's worth noting that Bollore is not completely out of weapons. Vivendi has the power to make repeated calls for votes on the board's composition. Were it to exercise that right, that would seriously disrupt Chief Executive Officer Luigi Gubitosi's efforts to execute his strategy. 

One way to ensure this fragile peace holds might be to give CDP three board seats, with six apiece going to Elliott and Vivendi. That would spread the influence a little more evenly, limiting the mutual antagonism, while giving Vivendi one more seat than it currently enjoys. It should be attractive to Elliott too, since a majority of the seats would still likely favor the network merger.

This tussle still has a little way to go. There's no guarantee that the egos in the room will find enough common ground so all the directors can pull in roughly the same direction. But if they do, it'll mean that shareholders can at last focus on the operational acumen of Gubitosi, without the distractions of feuding investors. Any discount on the share price that stemmed from the fighting now has a chance to evaporate.

But Friday's events suggests Bollore is willing to negotiate, and that's a welcome move. Maybe we're finally nearing a conclusion to this sorry mess.

To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

©2019 Bloomberg L.P.