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Vincent Bolloré spent years trying to convince investors his media conglomerate Vivendi was not just a collection of disparate businesses. This week, the French billionaire admitted defeat.
The Paris-based group whose activities range from advertising to pay-TV said on Wednesday evening that it would explore splitting itself up into three businesses. Investors welcomed the unexpected change of tack, sending its share price up as much as 10 per cent, and narrowing a large implicit gap between its market capitalisation and the sum of its parts.
“Breaking up the company is fantastic news for Vivendi shareholders,” said Olivier Fortesa, co-chief executive of activist investor Amber Capital, a top 10 investors with about 1.5 per cent of the group’s shares. “Day one, we see at least an additional €8bn in potential value to be unlocked.”
The lack of meaningful synergies between Vivendi’s businesses has long been a problem for investors — and a source of frustration for Vivendi. Bolloré’s 43-year-old son, Yannick, who has run Vivendi since his father retired last year, told the Financial Times this year that his goal was to show the group was “a coherent company and not a disparate set of holdings”.
But the trading discount to the sum of Vivendi’s underlying assets, estimated by Barclays analysts at about 40 per cent, has kept growing, nearly doubling since the spin out of the group’s most valuable businesses, Universal Music Group, two years ago.
“Despite all the work that’s been done, Vivendi has not managed to reduce the discount. So at a certain point you have to be pragmatic,” said a person close to Vivendi.
The completion last month of a long-awaited deal to buy rival French media conglomerate Lagardère Group, which includes publisher Hachette and travel retailer Relay, also gave Vivendi the space to act.
“Vivendi now has more time to pursue this plan considering the acquisition of Lagardère has recently completed, and the portfolio is more diverse than it used to with exposure to industries outside of media and entertainment,” wrote Silvia Cuneo, an analyst at Deutsche Bank.
The successful spin-off of Universal Music, whose shares have increased 10 per cent since listing in Amsterdam, means Vivendi believes “a separation of [French pay-TV station] Canal+ and advertising agency Havas could drive further value crystallisation for Vivendi”, she added. UMG’s market capitalisation stands at €47bn.
A planned break-up represents a new phase in Bolloré’s efforts to reshape his family’s holdings. The 71-year-old corporate raider has sold several of the businesses held by Bolloré Group, the family’s transportation and logistics company, slimming it down before turning his attention to Vivendi. Bolloré, who controls Vivendi through a 30 per cent minority stake, remains the key decision maker in the family businesses.
Vivendi is looking at options including a possible sale of its 24 per cent stake in Telecom Italia, according to Bloomberg. The move could help resolve a stand-off between the Italian company and its largest shareholder over a proposed €22bn sale of its fixed-line telephone network to private equity group KKR. Vivendi declined to comment.
Until recently, many investors and analysts had speculated that Bolloré would simply take Vivendi private — buying out minority shareholders without paying a big premium — using the proceeds from other divestments like UMG.
“It’s clear that this changes the direction of the project,” said a second person familiar with the company’s thinking. “The average discount for a conglomerate is 15 to 20 per cent. If it’s this pronounced, it means Vivendi has . . . not been able to find shareholders who are interested in the ensemble of these assets.”
The company is expected to take up to 18 months to study the plan. In the announcement on Wednesday, it signalled that the break-up would be evaluated based on impact for “all stakeholders”, as well as the tax implications.
If it goes ahead, both Canal+, which is Vivendi’s biggest profit centre, and Havas would become separate listed companies, with the Bolloré family holding company remaining a key shareholder.
Vivendi would then plan to have a third listed branch as an investment company that would house Lagardère, and include other listed and unlisted holdings in media and entertainment companies.
Both Havas and Canal+ have grown and made acquisitions to expand into new markets in recent years. Vivendi’s hope is that listing them will both unlock value and also provide the ability to use shares for further acquisitions. However not everyone buys this rationale.
“Splitting the company into three would not give Canal+, Havas or Lagardère more money to spend on M&A,” said Julien Roch an analyst at Barclays. “Vivendi together had arguably more firepower by being able to sell assets.”
The move may also make it easier for the Bolloré family holding company to increase its stake in one of the three smaller entities. “The split gives more flexibility to Bolloré,” Roch said.
“A break-up would make it easier to grow Canal + and Havas to their full potential. It also creates more optionality with opportunities for potential mergers and consolidations,” says Fortesa at Amber, which waged an activist campaign at Lagardère and helped Bolloré secure the acquisition of the media group. “We believe this marks the beginning of a new era for Vivendi, from a financial and industrial standpoint.”
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