Vivendi (VIV) Said to Consider Company Breakup

By Apr 25, 2012, 3:37 PM Author's Blog  

Vivendi SA (VIV) is considering an overhaul of its company structure that may lead to a breakup of the owner of the world’s largest music and video-game companies, according to people with knowledge of the matter.

One option under discussion is to split the Paris-based company into two, with one part incorporating media assets such as Universal Music Group and video-game maker Activision Blizzard Inc. (ATVI), said the people, who asked not to be identified because the deliberations are confidential. The other would include Vivendi’s telecommunications and content distribution units, they said, adding that the review is at an early stage.

Vivendi’s supervisory board, led by Chairman Jean-Rene Fourtou, is seeking to reverse a slide in the company’s stock and reduce a discount he puts at almost 40 percent because of the way Vivendi is structured as a holding vehicle of multiple units. The board is due to discuss the alternatives during a three-day summit with top executives in June, one person said.

Other options may include a partial or complete spinoff of pay-TV operator Canal Plus, which is 20 percent owned by publisher Lagardere SCA (MMB), the people said.

Changes in top management may also be announced after the meeting, one of the people said.

Shareholder Pressure

Vivendi’s stock has fallen 21 percent this year, making it the worst performer in France’s benchmark CAC 40 Index. Chief Executive Officer Jean-Bernard Levy last year spent 7.95 billion euros ($10.5 billion) to take full control of SFR. The French mobile-phone operator, Vivendi’s largest division, has seen its earnings decline as new operator Iliad SA (ILD) builds market share.

At 16.6 billion euros, Vivendi’s market capitalization compares with almost 40 billion euros in total value of its various businesses, not counting 12 billion euros of net debt, according to estimates by Morgan Stanley analysts. The investment bank values SFR alone at 12.9 billion euros, and Brazilian phone unit GVT at 5.2 billion euros.

Levy and Fourtou faced calls to change managers and invite new members to the board at the company’s shareholder meeting last week. Levy also came under fire from shareholders asking for plans to tackle the company’s low valuation.

“Our conglomerate discount has become gigantic, close to 40 percent,” Fourtou said at the meeting in Paris. “We will not stay idle, and there are no taboos about how we will tackle this. We will look over our strategy, our perimeter and our image among investors.”

By Marie Mawad, Matthew Campbell and Jacqueline Simmons

Courtesy of Bloomberg News

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