RPT-Vivendi shake-up sets off asset sale frenzy

Fri Jun 29, 2012 10:17am EDT

* Activision, Maroc Telecom seen as sale candidates

* News Corp style split seen possible, bad for debt holders

* SFR future in doubt after Combes withdrawal

* Bollore future role eyed

By Christian Plumb and Gwénaëlle Barzic

PARIS, June 29 (Reuters) - Just three months ago Vivendi's veteran chief executive Jean-Bernard Levy, under fire for a slumping stock price, said asset sales were "not taboo". Now that he's quit, the group could be looking at a more dramatic shakeup than he could have imagined.

Video game maker Activision Blizzard and Maroc Telecom head up the list of candidates for sale, analysts and bankers said, but his successors could now mull a Murdoch-style split or even the sale of the SFR telecoms unit which Vivendi grabbed control of just a year ago.

"I have the impression that all options are open with the exception of a full split of the group, which seems less likely," said one Paris-based banker. "But certainly asset sales are likely."

Vivendi, whose debt burden soared by roughly a third last year to 12 billion euros ($14.91 billion), has seen its stock price slump some 13 percent this year on growing concern about competition faced by its long-time cash cow, French telecoms operator SFR.

The company, which also controls assets including Universal Music Group and Brazilian telecoms operator GVT, provided few clues as to the strategic differences that divided Levy, who is quitting after nearly a decade, and the company's board.

But there seemed little doubt that Levy had stood for keeping intact most of the empire that he had built, while the board was eager to look at ways to boost the company's stock price and slash debt.

While speculation swirled around Activision, in which the company owns a 60 percent stake, the possibility of a split of the group into media and telecom assets, echoing News Corp's similar move announced earlier this week, could not be ruled out, analysts at Liberum Capital said in a note.

They also said SFR itself could go on the block, which would constitute a huge about-face just a year after the group bet big on the French telecoms business, spending 7.75 billion euros to assume full control of it from Vodafone.

Sources said on Thursday that Vodafone European head Michel Combes, who had been set to take the reins at SFR, would no longer make the switch, boosting uncertainty about the future of the unit, which is struggling with competition from upstart rival Iliad.

BOLLORE RETURNS

Vivendi shares, which jumped on Thursday, were up 1.7 percent at 1201 GMT, about in line with the European media sector as investors tried to assess the difficulties of an overhaul given that the company now has two executive positions vacant - CEO and the head of SFR.

"With what's going on with the company, we can think that there will be significant changes in the outline of the group, a major modification to this conglomerate," said Yohan Salleron, a fund manager at Mandarine Gestion in Paris. "But it seems too early to buy in the sense that we have no idea what's going to happen. You don't even know what you're buying at this point."

Still, Levy's exit was greeted by various analyst upgrades on optimism that group Chairman Jean-Rene Fourtou would now move to make shareholder returns his priority, especially with the imminent return to the board of longtime activist investor Vincent Bollore.

"Given his background, we would view his arrival as a positive given his reputation for accelerating value creation via asset sales or cost-cutting," Jefferies analyst Will Smith said in a research note, speculating that Activision and Maroc Telecom, the largest telecom operator in Morocco, could be sold.

Liberum Capital's Ian Whittaker, said he viewed SFR itself as a sales candidate, acknowledging that such a move "might seem odd" given that SFR is expected to produce 38 percent of the group's profits in 2012.

Mexican tycoon Carlos Slim, who has been on the acquisition trail in Europe, boosting his stake in Dutch telecom KPN , could be a candidate to buy it, he said.

Vivendi is under pressure not just from disappointed shareholders but also from bondholders who have become increasingly worried about its growing debt, likely to be exercerbated by a U.S. jury's demand that it pay Liberty Media Corp $954.6 million in damages.

While some analysts have said a Murdoch-style split of the group could unlock value, one at Exane BNP Paribas said last month that such a move "would aggravate, not solve the debt issue, unless there is complex financial engineering".

Vivendi, rated in the mid-triple B area, has ten euro-denominated bonds outstanding, the majority of which mature over the next five years.

The group's five-year credit default swap level is currently at around 215bp, having risen by around 6bp or 3 percent on Friday morning. It stood at around 170bp at the beginning of the year.