Loeb Builds Vivendi Stake at Crunch Time for Bollore’s Empire

U.S. activist investor Dan Loeb has built a stake in Vivendi SE at a critical moment for French billionaire Vincent Bollore’s media group, with shareholders due to vote on plans to spin off the world’s biggest music company.

Two other activists, Bluebell Capital Partners and Artisan Partners, are already lobbying against Vivendi’s plan for separating Universal Music Group, saying it will lumber most shareholders with a heavy tax bill and needs to be organized differently.

Although thwarting the move at Tuesday’s meeting will be an uphill task, investors are also questioning the value of Vivendi’s other holdings, and fighting against the company’s buyback plans.

Vivendi had a market value of around 34 billion euros on Friday, below the 35 billion euro valuation given to UMG when Vivendi struck a deal to sell 10% of the music company to U.S. investor Bill Ackman’s blank-check vehicle Pershing Square Tontine Holdings Ltd., ahead of listing UMG in Amsterdam at the end of September.

The UMG valuation suggests the market is valuing Vivendi’s other businesses, including France’s biggest pay-TV company Canal+ and the world’s fourth-biggest ad agency network, Havas, effectively at zero.

Loeb Builds Vivendi Stake at Crunch Time for Bollore’s Empire

On Sunday, Vivendi said the deal with Ackman is expected to take place in the coming weeks, and by mid-September at the latest.

Loeb’s New York-based hedge fund Third Point acquired the Vivendi stake several months ago, Bloomberg reported, and is currently examining the proposed Ackman sale, according to people familiar with the matter.

After the spinoff, “what will be left is black-box governance, an uneven track record of value creation, and a motley crew of assets: pay-TV, marketing comms, minority stakes,” Bernstein analysts wrote in a research note this month.

Vivendi will say more about its future plans after the UMG spinoff, according to a person with knowledge of the situation.

Media Conglomerate

Holders of around two thirds of Vivendi’s shares have shown up at their annual gatherings in recent years. If the pattern is repeated, Bollore, with almost 30% of the votes, needs to get just a handful of other investors onside to reach the 50% needed for the deal to pass. Two prominent shareholder advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., have come out in support of the spinoff, increasing the likelihood that other investors will vote for the plan.

But Loeb will have a chance to influence the future governance of UMG, where Bollore will still loom large with a 27% direct stake and the 10% holding that Vivendi plans to retain.

The future for Vivendi itself is less clear.

Loeb Builds Vivendi Stake at Crunch Time for Bollore’s Empire

Having UMG within the group helped management to keep investors onside as Vivendi was their only way to get equity exposure to the world’s most successful music company. ​

​As a source of reliable profit growth, UMG has towered over a patchwork of other interests ranging from pay-TV to advertising, book publishing, video games and events. The hit machine’s run of success has driven Vivendi stock up by more than 50% from its pandemic low in March last year.

Chief Executive Officer Arnaud de Puyfontaine suggested back in 2015 that the company could transform itself into an integrated European media content and distribution business with production budgets to rival the big U.S. media companies. The idea was to boost the value of Vivendi’s units through collaboration, for example by scooping up book publishing assets to feed ideas into Vivendi’s film studios.

But cross-border alliances in TV production and distribution are proving tough to pull off because of clashing cultures and national ownership rules. Bollore’s tactical stake-building to create a bridgehead into Italian media has been complicated by disagreements and costly legal battles. More recently he used cash from the sale of an initial stake in Universal Music to snap up stakes in publishing businesses in France and Spain.

Loeb Builds Vivendi Stake at Crunch Time for Bollore’s Empire

“A coherent vision is what they need,” said Bloomberg Intelligence analyst Matthew Bloxham. “It’s unclear what benefit Vivendi shareholders get from all its minority investments in listed companies.”

Buyback Battle

Any window of opportunity for activists to shake up the media group may narrow if another resolution up for a vote at Tuesday’s shareholder meeting is waved through -- a plan to buy back as much as 50% of Vivendi stock.

Bluebell is trying to block that motion too, saying it could potentially allow Bollore to further tighten his grip on Vivendi. Glass Lewis has also advised shareholders to oppose the move, saying Vivendi hasn’t properly explained its intentions.

Bollore’s holding company has denied any plan for a creeping power grab. Yet the uncertain outlook for a Vivendi shorn of UMG has left seasoned observers pondering his next move. The billionaire may be waiting for a fall in Vivendi’s stock price that would allow him to buy out other shareholders at a cut price, said Denis Branche, managing director of Phitrust, a French investor that lobbies for good corporate governance.

“It can be hard to read Bollore’s intentions, but you can be sure he always has a plan,” said Branche.

©2021 Bloomberg L.P.

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