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Analyst: Vivendi's Rejection of Offer for Universal Music Good for Stock Sentiment

Jean-Francois Dubos Vivendi CEO P
Vivendi CEO Jean-Francois Dubos

With management focusing on the company's entertainment assets, UBS analyst Polo Tang says "it would be odd for Vivendi to sell now."

LONDON -- The decision by French media and telecommunications conglomerate Vivendi to reject a reported $8.5 billion takeover offer for Universal Music Group is good for sentiment and buzz surrounding the company's stock, according to an analyst.

Japanese telecom giant SoftBank had made the approach a few months ago, the Financial Times reported. A Vivendi spokesman declined to comment.

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"The news is likely to be positive for sentiment and reignite breakup hopes," said UBS analyst Polo Tang.

But he described the price tag for the world's largest music company as only "a modest premium." Tang values UMG at $7.8 billion. "A $8.5 billion offer would add only €0.4 per share," or 2.5 percent, to the current stock price, he explained.

He also said a sale of the music giant doesn't fit with Vivendi's recent decision to focus on its media and entertainment holdings, while looking to sell off its telecom assets over time.

"Vivendi is looking to become more of a media-focused business, and UMG is at the core of this," Tang said. "After a decade of decline, the music industry seems to be at an inflection point -- digital growth offsetting physical declines -- and UMG will benefit from the number one position in the industry and synergies with EMI. So it would be odd for Vivendi to sell now."

STORY: Vivendi Rejected $8.5 Billion Offer for Universal Music Group

Analysts and investors continue to wait for a deal announcement from Vivendi though.

"Vivendi seems happy to play a waiting game," Sanford C. Bernstein analyst Claudio Aspesi said in a recent report. "Management indicated no timeframe for a decision on [an expected sale of] Maroc Telecom. They reiterated they will seek to develop [Brazilian broadband firm] GVT, whilst on [its stake in video game company] Activision Blizzard, they will await the board's review."

Tang said Friday: "The next catalysts [for Vivendi's stock] are the disposal of Maroc -- widely flagged -- and a monetization of the stake in Activision."

But he also highlighted that "we remain wary of further downgrades at [telecom arm] SFR given ongoing competition in French mobile."

At midday Friday, Vivendi's stock was up 1.8 percent.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai