Vivendi's New Plan Could be to Buy Out Minority ATVI Shareholders....(Full text of link)
Below is the full text from the October 16, Financial Times article...5th and 6th paragraphs from the bottom is the specific reference...
Vincent Bolloré’s imminent arrival on Vivendi‘s board adds to expectations of radical change at the sprawling French media and telecoms conglomerate. The Breton billionaire, who has made a fortune identifying undervalued media companies such as Britain’s Aegis, has recently acquired a stake of more than 5 per cent in Vivendi, leading to Tuesday’s announcement that he will be proposed for a board seat.
Mr Bolloré’s emergence has sparked hopes among some investors that the company’s “no taboo” review of its holdings, which started in the spring, will lead to a complete or partial withdrawal from telecoms. Much, though, depends on what it can sell or spin off.
People close to Mr Bolloré have stressed that it is “too crude” to say he does not like telecoms. But the man known in France as “le petit prince du cash flow” has clear reservations about the heavy capital spending the telecoms industry needs and has favoured media investments.
That chimes with Jean-René Fourtou, Vivendi’s 73-year-old chairman, who wants to refocus the company on its media assets – notably Universal Music Group which recently completed the £1.2bn purchase of EMI’s recorded music business.
The disclosure this week that Vivendi is in talks about possibly spinning off SFR, France’s second-biggest telecoms operator, shows how far he could go.
People close to the SFR negotiations – which would involve merging it with Numericable, a French cable group owned by Carlyle, Cinven and Altice – say they are still “highly preliminary” and that the two sides are far apart on valuation. Other SFR options include the possible sale to a trade buyer such as Vodafone , a flotation or simply keeping it.
But the fact that SFR is even up for discussion shows the profound change at Vivendi since Mr Fourtou seized back control of the company from Jean-Bernard Lévy, the former chief executive closely associated with the telecoms businesses who quit in June.
Mr Fourtou has also engaged bankers to examine a sale of Vivendi’s two other telecoms assets: a controlling stake in Maroc Telecom, Morocco’s biggest operator, and GVT, a Brazilian fixed-line provider.
SFR generates almost 40 per cent of Vivendi’s operating profit and many observers believe its size and €13bn-€15bn value will make a sale or spin-off difficult. But some analysts have long argued that the company should sell SFR and Maroc to concentrate on media.
“If they managed to get rid of SFR and the other telecoms assets, you could end up with a media company with decent cash flows and cash to spare,” says Claudio Aspesi at Bernstein Research.
Ian Whittaker at Liberum Capital adds: “Getting out of SFR would make total sense. Vivendi suffers from being rated as a telecoms company so its dividend yield is unattractive compared to peers. But if you sell SFR and Maroc, then you get a media rating, even if you keep hold of GVT, which is growing rapidly. That would make them far more attractive.”
Vivendi’s directors say the first priority from asset sales will be paying down the company’s €14bn net debt to protect bondholders.
However, investors hope any big disposals would also enable share buybacks. Liberum estimates that a sale of SFR and Maroc could theoretically allow a return of €6.7bn to shareholders.
Mr Aspesi and Mr Whittaker say they would also welcome more investment in Activision Blizzard, Vivendi’s video games company, should the telecoms assets be sold.
Mr Fourtou has also explored a sale of Activision. But Mr Aspesi says: “Now might be a good time to supplement it with other bolt-on gaming properties, if they get out of telecoms.”
Mr Whittaker argues that telecoms sales proceeds could be used to buy out Activision’s minority shareholders, who own 39 per cent of its stock. Full control would let Vivendi include the games maker’s €2.4bn of net cash on its balance sheet, helping it cut debt.
Despite the appeal of a re-rated Vivendi, analysts concede that the new structure will depend on what assets can be divested and when.
SFR is difficult because its value has fallen sharply since Vivendi paid €8bn to buy out Vodafone’s 44 per cent stake last year.
The Moroccan government needs to clear any Maroc deal and GVT’s most obvious buyer is Spain’s cash-constrained Telefónica. “The real problem is that it’s a lousy time to sell anything,” Mr Aspesi concludes.
The company itself says it is in “no hurry” to sell anything, although it hopes to shed light on its new strategy within “weeks or months”. Mr Bolloré sees Vivendi as a “long-term strategic investment”, so other shareholders looking for unlocked value may need patience.