Vivendi Takes Step Toward Focusing on Media, Entertainment Businesses

Vivendi CEO Jean-Francois Dubos

The company has entered into exclusive negotiations to finalize a sale of its 53 percent stake in Maroc Telecom for around $5.5 billion as it looks to trim its telecom holdings.

LONDON – French media and telecom conglomerate Vivendi on Tuesday took a key step toward focusing its asset portfolio on its media and entertainment businesses, as management has said it plans to do.

The company said it has entered into exclusive negotiations to finalize a sale of its 53 percent stake in Maroc Telecom for around $5.5 billion (€4.2 billion) in cash to Etisalat, a telecom giant based in the United Arab Emirates.

Vivendi also announced a network sharing agreement between its French telecom arm SFR and Bouygues Telecom, which is expected to help it cut costs.

The Maroc Telecom sale could lead to further sales or spinoffs of telecom businesses by Vivendi in coming years, according to industry observers. That could eventually leave the company centered around French pay TV firm Canal Plus and Universal Music Group.

Analysts gave the news mixed reviews. "Although this is far from the €5.5 billion Vivendi was initially seeking [for Maroc Telecom], it should be well received by the market today as Vivendi...also announced a network sharing deal with Bouygues," said UBS analyst Polo Tang. "On the network sharing deal, we believe Vivendi can achieve synergies of up to 20 percent."

Sanford C. Bernstein analyst Claudio Aspesi said the price tag for Maroc Telecom "offers no change of control premium." But he estimated a stock price value of $1.45 per share (€1.10) for the network sharing deal.

The Maroc sale still needs to clear some hurdles, though. "The final agreement is subject to informing and consulting with the French Works Councils and to negotiating agreements between Etisalat and the Moroccan government," Vivendi said. Vivendi and Etisalat plan to close the transaction before the end of 2013, provided they obtain the regulatory approvals.

Analysts are also looking for news from Vivendi on a possible special dividend payment by video game giant Activision Blizzard, in which Vivendi owns a controlling stake. That could raise cash for debt repayments by Vivendi. Industry observers have said the two companies have been discussing such a move or a possible buyout of Vivendi's stake by Activision, given that Vivendi has signaled an interest in concentrating on businesses it fully owns.

"The network sharing deal with Bouygues should revive hopes of further changes to the perimeter and give room for Vivendi to maneuver to sell/extract cash from Activision," said Tang. He expects a conclusion on Activision by year's end at the latest.

Vivendi recently rejected a reported $8.5 billion takeover offer for Universal Music Group. Tang has said this was good for investor sentiment and buzz surrounding the company's stock.

But Aspesi expressed some concern about the likely lack of further major asset sales by Vivendi in the near future. "Beyond this...there are no likely divestitures before 2015, and the decision to not sell UMG looks questionable," he said.

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