Consob has decided: Vivendi de facto controls Tim. In the evening, the Stock Exchange Control Commission released a statement on which there was great expectation. But Tim, a few hours later, announces that he will appeal to the competent bodies since the provision "significantly differs from the established practices on the matter". Also on Wednesday evening, the Agcom board requires the French to drop below 10% in Mediaset and accepts Vincent Bolloré's proposal to transfer the excess 9,9% (equal to 20% of the capital) to a trust within the next April.
It was just after 19pm when Consob published its decision: "Following an in-depth analysis of the legislation in force and of the factual elements, Consob has concluded that Vivendi's investment in Tim must be qualified as a de facto controlling interest pursuant to art. 2359 of the civil code and art. 93 of the TUF, as well as the regulations on transactions with related parties, for the reasons indicated in the attached letter". Consequently, Vivendi should have notified the Italian government of the group's new governance situation (the deadline expired on August 7), while it limited itself to declaring at the end of July that it exercised a simple management and coordination activity over Tim. He didn't and that could result in a fine of 350 million. But much heavier would be the burden of debt consolidation which would unload a mountain of 7 billion in debt on the French group. However, Tim would also bring 4 billion more revenues and 400 million profits than the 2016 budget.
It is already evening when Tim replies, stating that he has received "a provision with which the National Commission for Companies and the Stock Exchange declares that it believes that the reference shareholder Vivendi SA (currently the holder of 23,94% of the ordinary capital, and exercising management and coordination over the Company) “exercise de facto control over TIM pursuant to art. 2359 of the civil code and pursuant to art. 93 of the TUF, as well as in accordance with related party regulations”. From a preliminary examination - the note continues - it is found that the provision deviates significantly from the consolidated interpretation on corporate control, which TIM (and reasonably the entire market) has always consistently and rigorously complied with. The Company will implement legal actions for its own protection in the competent offices, sure of the correctness of its behavior and of the solidity of its arguments".
The document sent by Consob to Tim, the company's board of statutory auditors and Vivendi is long and articulated and develops into 22 pages – attached here – in which it retraces all the stages of Vincent Bolloré's advance on Telecom Italia and focuses in particular on crucial period that goes from the assembly of 4 May with which the new directors were appointed, to the Tim press releases of 27 and 28 July which marked the change at the top with the departure of the CEO Flavio Cattaneo and the conferral of operational powers to the chairman Arnaud de Puyfontaine, upon the entry into management of Amos Genish.
In essence, Consob believes that a 23,94% stake (lower than the quota envisaged to trigger control over a listed company) is not sufficient to demonstrate that there is no control. On the contrary, the Commission argues citing the civil code and the regulation on transactions with related parties (OPR), "what counts for the purpose of identifying the controlling entity is not a particular formal situation (the ownership, for example, of more than 50% of the ordinary share capital), but they are the real positions of power within the company, determined by the number of votes which in fact can in any case be used to achieve dominant influence over the investee through the appointment of the majority of the members of the Board of administration".
And Vivendi, continues the Consob reasoning, was able to determine the majority list in the meeting, to appoint 10 directors out of 15 and to determine the management of Tim through three key men of Vivendi: in addition to de Puyfontaine, also Hervé Philippe and Frédéric Crépin who joined the committees (Strategic, Appointments and Control). It has also undertaken to sell Persidera to the European Antitrust. Finally, the fact that relevant resolutions of the TIM BoD on organizational matters starting from May 4, 2017 have always been adopted by a majority, therefore with the presumed opposition of the minority directors appointed by the funds. Consob also cites the position taken by the board of statutory auditors, sent to the Commission on 5 September 2017, which "with the unanimity of its members, believes that at present the conditions exist to qualify Vivendi as the parent company of Telecom Italia".
Now Vivendi and Tim have 60 days to appeal the TAR. And, as announced, they intend to do so.
Attachments: CONSOB LETTER TO TIM AND VIVENDI
