VIVHY - Vivendi: A Lot Of Corporate Action Movement Here

2023-03-11 01:16:35 ET

Summary

• Vivendi's talk with the European Commission regarding the Lagardère antitrust review is a key highlight of its FY22 earnings.
• The cancellation of 42 million treasury shares in 2H23 has potentially paves the way for Bollore Group to make a bid with over a 30% stake.
• Investors with a higher risk appetite may consider accumulating a position in anticipation of potential positive stock price moments post the EC decision.

Overview

Vivendi's (VIVHY) FY22 earnings have been impressive, with its talks with the European Commission [EC] about the Lagardère antitrust review being a key highlight. In addition, the cancellation of 42 million treasury shares (4Q22 earnings call) in 2H23 has captured the attention of shareholders, potentially paving the way for Bollore Group to make a bid with over 30% stake. While VIVHY's FY23 guidance was limited, it did include updates on organic growth and profitability for Havas and Canal+. Investors seem to be more interested in corporate actions than earnings, and the completion of the Lagardère transaction is a major hurdle that management hopes to overcome by the end of May. Once this is done, VIVHY's attractive equity story would be a defensive business with cashflows from Canal+ and potential bids from Bolloré group. Investors with a higher risk appetite may consider accumulating a position now in anticipation of a potential positive stock price movement following the EC's decision.

Bollore bid

I am closely watching the situation with Bollore Group and their potential bid. VIVHY recently announced the cancellation of 42 million treasury shares in 2H23, which could allow Bollore to exceed the 30% threshold and trigger a mandatory bid. However, I don't think Bollore will be forced into a bid because they have the option to sell a portion of their stake to remain below the threshold. It would also make sense for Bollore to signal to the market that a mandatory bid will not happen, which could prompt investors speculating on a bid to sell off their stake and potentially lower the equity value. And with the proceeds from the sale of their African logistics business , Bollore should now have the capital they need to bid for VIVHY stake and also reinvest into the logistic arm.

Lagardère

As I analyze the current state of affairs surrounding the completion of the Lagardère deals, it appears that VIVHY is now faced with the final obstacle. The company must sell Editis to receive EC approval for its 57% stake in Lagardère. Management has proposed (1H22 earnings call) selling Bollore's effective 29% stake in Editis to a reference shareholder and spinning the remaining shares to Vivendi investors to achieve this. While the plan appears promising, it is not set in stone until it is accomplished. Although there is still a range of potential outcomes, I believe we are approaching the end of the process. Shareholders should be optimistic about the timeline, as management anticipates increased clarity by mid-March and expects to finalize the Lagardère acquisition by the end of June. Despite being unable to realize synergies with Editis, VIVHY's publishing interests will be propelled to one of the top three international players, making this a net positive. Also, once full visibility on pandemic recovery is achieved, I believe management will sell the travel retail business to fund the acquisition of its Lagardère stake.

UMG

No plans have changed regarding the sale of UMG, and management is still fully invested. Despite past discussions of selling down its stake to fund other initiatives, management has made it clear that there are no plans to sell UMG. As was previously mentioned, the sale of African Logistics has resolved Bollore's funding concerns. Importantly, management has made it abundantly clear that it has no plans to divest its UMG holdings. It is quite pleased with UMG's strategy and financial performance, and has full faith in its management.

Conclusion

In conclusion, VIVHY FY22 earnings have been impressive, with a key highlight being its talks with the EC about the Lagardère antitrust review. While the cancellation of 42 million treasury shares in 2H23 has captured the attention of shareholders, the completion of the Lagardère transaction remains a major hurdle that management hopes to overcome by the end of May. Meanwhile, Bollore Group's potential bid is also a closely watched situation – which I believe that Bollore will not be forced into a bid. Finally, regarding UMG, management has made it clear that they have no intention of divesting their holdings, as they are pleased with UMG's performance and management. My recommendation is that investors with a higher risk appetite may consider accumulating a position now in anticipation of potential positive stock price movements post the EC decision.

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