Activist Bluebell Asks Regulator to Probe Vivendi Music Spinoff

Activist hedge fund Bluebell Capital Partners has called on French market regulator Autorite des Marches Financiers to investigate Vivendi SA’s plans to spin off Universal Music Group, saying the media company hasn’t leveled with shareholders over key terms of the deal.

Bluebell said Vivendi, which is controlled by billionaire Vincent Bollore, merged two Universal Music entities in February in preparation for the spinoff without telling investors or seeking their approval. The move means shareholders are faced with a “fait accompli” that removes the option of a more tax-efficient structure for the deal, Bluebell told the AMF in a letter seen by Bloomberg on Tuesday.

A representative for Bluebell confirmed the contents of the letter.

Had the initial merger of the Universal Music entities -- Universal Music Group Inc. and Universal International Music BV -- been made public it would have had a significant effect on the value of financial instruments, Bluebell said. The activist said this meant the merger “could be considered as taking place with the benefit of inside information.”

Bluebell also said it wasn’t clear how much of Universal Music will be held by Vivendi after the spinoff, and said there was a risk that Vivendi’s board planned to eventually allow its reference shareholder -- Bollore -- to strengthen his control over Universal Music and passively exceed the level of ownership that would normally trigger a bid for the company.

Bluebell asked the AMF to look closely at the case and take “the appropriate corrective steps to ensure that Vivendi’s shareholders are provided with sufficient disclosures” ahead of an annual meeting on June 22, so that they can vote on the Universal Music separation with all the facts to hand.

A representative for the AMF declined to comment, while a spokesperson for Vivendi didn’t immediately respond to request for comment.

Universal Music, the world’s biggest music company, has driven most of Vivendi’s growth in recent years as the home of stars like Taylor Swift and Ariana Grande capitalized on the boom in music streaming. Vivendi’s other main interests lie in pay-television, advertising and publishing.

The letter to the AMF marks Bluebell’s second broadside against the Universal Music spinoff in quick succession. In late May, it called the current plan to distribute 60% of Universal Music shares to Vivendi stockholders tax inefficient and said the French company should pay billions of euros in cash to shareholders when it spins off the music company.

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