Activist Bluebell Capital takes aim at Vivendi
Activist hedge fund Bluebell Capital is following up its successful campaign at Danone by taking aim at another big French corporation, the media group Vivendi, and its powerful controlling shareholder billionaire Vincent Bolloré.
The London-based boutique fund, which runs just €70m in assets, sent two letters to Vivendi in May to question the details of its upcoming plan to hive off its biggest asset, Universal Music Group, by distributing 60 per cent of its share capital to shareholders.
Vivendi has billed the separation of UMG, which will be submitted to a shareholder vote on June 22, as a way to unlock value given the soaring valuations enjoyed by music companies driven by the rise of streaming services.
The French group, which owns 80 per cent of UMG, has valued the business at €33bn. The remaining 20 per cent is owned by a consortium led by Chinese group Tencent.
In a letter dated May 21, Bluebell said that while the spin-off was a good idea in principle, the method that Vivendi had chosen for the transaction was “suboptimal”. The structure, which is known as a dividend in kind, would lead minority shareholders to be hit with significant tax bills.
To remedy the issue, Bluebell asked Vivendi to pay shareholders an additional extraordinary cash dividend of €2.80 per share, or about €3.3bn.
“We are extremely in favour of separating UMG from the rest of the business. It is the right move and investors have long pushed for this to reduce Vivendi’s holding company discount,” said Marco Taricco, Bluebell co-founder, in an interview.
“What we have reservations about is the way they are executing the separation by doing a dividend in kind. It is suboptimal for all shareholders except for Vincent Bolloré and Groupe Bolloré.”
Taricco declined to give the size of Bluebell’s stake in Vivendi.
Vincent Bolloré effectively controls Vivendi because his holding company owns a 27 per cent stake and has 29.73 per cent of the voting rights, which is just under the legal threshold that would require a full takeover offer.
In the proposed separation of UMG, the billionaire would “not likely” face similar tax issues as minority shareholders, said Taricco, and would remain the UMG’s reference shareholder with a 19 per cent stake in the new entity.
The fund also expressed concern about how Vivendi had already transferred UMG assets into a newly created Dutch company even before securing shareholder approval for the spin-off. “Vivendi’s shareholders have effectively been presented with a fait accompli,” it wrote in the letter.
At this stage, Bluebell has stopped short of recommending that its fellow shareholders vote against the proposed separation of UMG at the upcoming annual meeting, said Taricco. “We have provided a remedy for them to admit they did not do the transaction in the proper way,” he said, referring to the idea of paying a special dividend.
Vivendi declined to comment on whether the group would be open to such a payment, but defended the structure of the transaction as “the best option”.
“We listen to all our shareholders and will examine all the different proposals,” Vivendi said.
Universal Music Group, which is home to artists such as Taylor Swift and Lady Gaga, has driven most of Vivendi’s growth in recent years.
If the spin-off were completed, Vivendi’s remaining businesses would be much smaller and largely focused on France. They include pay-TV operator Canal Plus; communication agency Havas; mobile games publisher Gameloft; and book publisher Editis.
In 2019, UMG accounted for 45 per cent of Vivendi’s €15.9bn in sales and 73 per cent of its operating profit of €1.5bn.
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