Lagardere seeks sale of Canal+ TV stake

PARIS Thu Apr 15, 2010 8:37am EDT

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PARIS (Reuters) - Lagardere (LAGA.PA) has put the 'for sale' sign up on its 20 percent stake in French pay-TV group Canal+, in a move to streamline the aerospace-to-media conglomerate which has come under fire for its strategy.

Lagardere's announcement on Thursday came on the last day of an annual month-long window the company has to initiate sale proceedings under its shareholder pact with Vivendi (VIV.PA), which owns the remaining 80 percent of Canal+.

The move comes as Lagardere is facing a challenge on the way the company is managed from activist investor Guy Wyser-Pratte who is pushing for a board seat, changes to the family-controlled governance structure and a strategic review.

Analysts have valued the Canal+ stake at over 1 billion euros ($1.4 billion) but say it is unclear what Lagardere would want to do with the proceeds. Lagardere is mulling expansion moves but also has a debt level of three times its expected 2010 EBITDA, at 1.82 billion euros.

Under the terms of the Canal+ shareholder pact Vivendi has first right of refusal to buy the Lagardere stake but the two sides are far apart in agreeing a price, according to analysts and bankers close to the situation.

Lagardere, which publishes magazines like Elle and Paris Match and runs radio and TV stations, has an option under the shareholder pact to seek a listing for its Canal+ shares if no accord can be reached.

Shares in Lagardere were down 2.7 percent at 31.76 euros at 1216 GMT in a roughly flat French market. Analysts said the drop reflected concern that the two sides would not agree on a price and no deal would be done. Shares in Vivendi were off 0.1 percent at 19.95 euros.

"Vivendi and Lagardere have been facing off on the Canal Plus stake for a long time," said one London-based analyst.

"This is the opening of the negotiations, whether they can actually agree on a price is another matter."

Vivendi is expected to offer a lower price than it gave to other minority shareholders, broadcasters TF1 (TFFP.PA) and M6 (MMTP.PA), in recent months, according to analysts. Those two firms had put options that stipulated a certain minimum price, which Lagardere does not have in its pact with Vivendi.

Lagardere, meanwhile, will use the threat of an IPO of the shares, which is not in Vivendi's interest, as a way to influence the negotiations.

Credit Suisse analysts valued the stake at 1.4 billion euros ($1.9 billion) in a note published on Wednesday, while CM-CIC analysts have valued the stake at 1.05 billion euros, or 30 percent under the price offered to TF1 and M6.

Lagardere has hired JPMorgan and BNP Paribas to advise it on the sale.

Lagardere's move to seek a sale was widely expected since the group has long said it wanted to exit Canal+ TV.

Lagardere trades at a conglomerate discount that analysts estimate at 15-20 percent. Investors penalize it for owning minority stakes in Canal+ TV, a 7.5 percent stake in European aerospace and defense group EADS EAD.PA, as well as for being present in a wide range of slow-growth businesses, such as books, newspapers, radio, TV and sports.

By selling Canal+ TV and EADS, which Chief Executive Arnaud Lagardere has indicated he would like to do at some point, the company would re-focus its investment on businesses in which it has majority control.

But to date Arnaud Lagardere's strategy remains unclear, according to analysts. The son of the group's charismatic founder could seek new growth in the area of sports or emerging markets, but analysts say he has not laid out a clear vision for what he would do with the money raised from the asset sales.

However Arnaud Lagardere is facing pressure on strategy from activist investor Wyser-Pratte, who is seeking a board seat and a change to the group's current partnership structure which effectively concentrates power in the hands of the chief executive.

Wyser-Pratte has taken a stake of 0.53 percent in Lagardere and has tabled two resolutions for a meeting of shareholders on April 27.

($1=.7331 euros)

(Additional reporting by James Regan; Editing by Greg Mahlich)

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