France's Billionaire Sun King Hands the Crown to His Son

(Bloomberg Gadfly) -- Vivendi SA's annual meeting lasted two hours, 26 minutes and 31 seconds. To find the moment where chairman Vincent Bollore anoints son Yannick his successor, you have to fast forward to the final 30 seconds.

After a brief preamble where Bollore Pere announces it would be his last AGM, and recounts an anecdote about Louis XIV waiting too long to pass control to his son, he revealed the board and corporate governance committee would vote on the nomination shortly.

While attendees start to applaud, the camera cuts to a grinning Bollore Fils as the father says he hopes to remain "advisor" to the board. Almost as an afterthought, he tells the room: "We'll keep you updated as to whether Yannick is confirmed or not -- it's not a done deal."

The episode is pretty bizarre by usual corporate governance norms. But, when it comes to Vivendi, unsurprising. Needless to say, Yannick was approved. The nomination committee is four strong, of whom three are Bollore appointees (including Vincent himself). For years, Bollore denied he was trying to build a media dynasty through his minority stake in Vivendi. Then last June, he admitted his aim was to place Yannick at the helm.

By the letter of the law, everything was done properly. But it displayed a characteristic insouciance towards the investors who hold the 80 percent of the stock that the family company Bollore SA doesn't.

Because of French corporate rules, which give shares double votes after two years, the Bollores hold some 30 percent of the voting rights. It's the sort of structure of which even a Silicon Valley founder would be proud. Yet Bollore Senior has only been involved with Vivendi, whose origins can be traced back to a 19th century national water utility, for a little over five years.

Credit where due. Vivendi has performed better than France's benchmark CAC 40 index over that period. But there are still doubts about how well the company has reallocated the proceeds from sales such as the 13.5 billion euro ($16.6 billion) disposal of SFR to Altice SA. 

Bollore has acquired a 24 percent stake in Telecom Italia Spa, but the shares are languishing well below the purchase price and now Vivendi is embroiled in a bitter battle for control with activist hedge fund Elliott Management Corp.

Elsewhere, the strategic logic of the 3.9 billion euro acquisition of advertising group Havas SA, bought from the Bollore Group, has at best been poorly explained. Viewed less charitably, you could say it's the interests of the family coming way before the interests of Vivendi's other shareholders.

One carrot is keeping investors sweet: Universal Music Group. Vivendi again on Thursday dangled the prospect of an IPO of the world's biggest record label. UMG accounts for 45 percent of Vivendi revenue and 70 percent of operating profit, and has been revived by the surge in music-streaming royalties.

The prospect of unlocking some of that value is attractive. But again you'd have to wonder about how Vivendi might use proceeds of a stake sale, given its recent record. It's the perils of having a Sun King and his gilded descendants in charge.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Alex Webb is a Bloomberg Gadfly columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

©2018 Bloomberg L.P.

Bloomberg
View Opinions From Business And Policy Experts On BloombergQuint