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* Elliott move into Telecom Italia part of trend
* Activists shaking up once cosy Italian system
* Families and politics still provide obstacles
By Maria Pia Quaglia
Once a gentile club that resolved its problems in quiet,behind closed doors, corporate
North American and British investors, who favour moreaggressive investment styles, have been steadily building theirpresence in
Anglo-Saxon funds own 60 percent of the blue chip Italianstock market according to Borsa Italiana -- itself part of theLondon Stock Exchange Group.
The Italian exchange does not give historical comparisonsbut corporate governance experts say the influence of thesefunds has been climbing.
"The Italian market seems to have become ripe for activism,especially in the last three years," said Fabio Bianconi,director of corporate governance consultancy Morrow Sodali.
"Activists in
Elliott made its move into Telecom Italia (TIM) early thismonth, declaring itself a new, minor shareholder and challengingthe former phone monopoly's controlling shareholder, Frenchmedia group Vivendi, to launch a major shake-up.
TIM has lost more than a third of its market value sinceVivendi first took a stake in mid-2015. Elliott, founded by WallStreet hedge fund pioneer Paul Singer, wants TIM to partiallysell its fixed-line network, possibly through a listing, and hascalled for Vivendi's directors on the TIM board to be replaced.
This week, a battle of activists broke out over Italiantelecoms infrastructure firm Retelit. German activistfund Shareholder Value Management lined up against a plan byother investors to depose Retelit's current chief executive asit supports the current business plan.
CHANGING DYNAMICS
Activist investor Amber Capital, which looks foropportunities to improve corporate governance, has run 10activist campaigns between 2015 and 2017 in
"The shareholder structure of Italian companies has becomeless concentrated: when the financial crisis started to hamperbanks' lending, controlling shareholders were forced to placepart of their stakes with institutional investors," said ArturoAlbano, corporate governance specialist at Amber Capital.
The weight of institutional investors in Italian firms hasmore than doubled in the last 20 years, based on Bank of
Their participation in shareholder meetings has also grown.
Until 2010, when a law clarifying voting rights came intoforce, shareholders were unclear of their voting rights in theevent that their holdings had changed in the weeks leading up toa shareholder meeting. That often deterred them from voting.
The law introduced a 'record date', usually seven tradingdays before a meeting, which gave funds certainty over how manyvotes they could cast at the upcoming meeting.
"They are now in the position to back the proposals of othershareholders, including those of activist investors, if theycreate value for all stakeholders," Albano said.
PUTTING DOWN ROOTS
Shareholder activism still faces challenges in
Families control firms accounting for 33 percent of theItalian exchange's total market value and can wield powerfulblocking stakes against activist investors.
Politics can also get in the way: the Italian governmentholds indirect stakes in some of the country's most importantlisted companies and it has a legal veto -- its so-called'golden power' -- over changes of control in strategic firms.
Politics have not deterred Elliott, whose push for ashake-up at TIM touches on assets deemed by the government to beof national interest, such as its fixed-line network and itssubmarine cable business, Sparkle.
"Political risk is something activist funds are learning todeal with after Knight Vinke's mixed experience with Eni," saidfinance expert Hannes Wagner, of
Today's activism is sprouting from roots that were put downa decade or more ago, as share registers opened up and activistinvestors gained more experience of working in
Last year, Wagner published a detailed analysis of 1,740activist "engagements" with listed companies in 16 countriesbetween 2000 and 2010, concluding that around 13 percent ofItalian firms had had to deal with shareholder activism.
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