Vivendi only half-solves its valuation discount
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon
LONDON, July 22 (Reuters Breakingviews) -Vivendi VIV.PA is calling international investors to the rescue. The 11-billion-euro French media conglomerate said on Monday that it would spin off and list its pay-TV arm Canal+ in London, and advertising group Havas in Amsterdam, as part of a broader split. It will help to reduce the conglomerate discount, but only for some of the bits.
Vivendi, 30%-owned by the family vehicle of billionaire Vincent Bolloré, is breaking into four parts: pay-TV business Canal+, ad arm Havas, a publishing and retail unit called Louis Hachette Group, and the current parent company, which will own investment stakes like 10% of Universal Music, a quarter of Telecom Italia and video game maker Gameloft. The company on Monday said it will list Canal+ in London to underline its international nature. Two-thirds of subscribers, and most of its growth prospects, are now outside France. The Havas Dutch listing will allow the Bollorés to keep extra voting rights.
The two internationally listed divisions could get a higher value than implied now within Vivendi, whose enterprise value is 13 billion euros. Canal+ alone, for example, may be worth around 5.5 billion euros – assuming that its revenue grows this year at the same pace as in the first quarter, and using the same sales to enterprise value multiple as Germany’s Prosiebensat 1 Media PSMGn.DE. Havas will book about 3 billion euros of revenue this year, analysts reckon, and would be worth around 2.6 billion euros, using the average multiple for the industry according to LSEG data. Both units will be spun off debt free.
Investors may still slap a discount for governance problems on the two units, since the Bollorés will keep calling the shots, but it should be smaller: Investors will hold them of their own volition, rather than having them lost in the bundle of businesses that currently comprises Vivendi.
The same isn’t true for the remaining Paris-listed bits. Louis Hachette Group will own various media and retail assets including Vivendi’s near-2-billion-euro stake in publicly traded Lagardere LAGA.PA. It will keep on its books Lagardere’s 2 billion euros of debt. That means the unit will have a listing within a listing, and assets spanning airport shops to publishing – hardly a recipe for a clean valuation multiple.
Vivendi itself, reduced to an investment company, looks even worse. It will keep the group’s net debt of about 2 billion euros, with the Telecom Italia and Universal stakes, worth more than 6 billion euros at current market prices, as well as Gameloft. It’s hard to see an argument for all those assets sitting under the roof – and hard to imagine investors valuing them at anything approaching face value.
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CONTEXT NEWS
French media group Vivendi said on July 22 that it would seek a London listing for its pay-TV arm Canal+, while its Havas advertising business will be listed in Amsterdam under its breakup plans.
Vivendi will remain listed in Paris and become an investment holding company, managing notably a 10% stake in Universal Music Group, the world’s biggest music label, which it also spun off three years ago. It will also include Gameloft, a video game maker, and the group’s stake in Telecom Italia.
Graphic: Vivendi total returns since Bolloré started buying shares https://reut.rs/4c1J98c
Editing by Liam Proud and Aditya Srivastav
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