* Vivendi could raise $10 bln with sale
* Tencent, Time Warner, Microsoft possible bidders
* Activision seen as first step in break-up
By Sophie Sassard
LONDON, July 6 Vivendi, the French
media-to-telecoms conglomerate, has started testing the appetite
of possible bidders for its video game business Activision
Blizzard, five sources close the situation said on
The group, whose chief executive Jean-Bernard Levy stepped
down last month, is anxious to prove that it is taking action to
address concerns over its huge debt burden and flagging share
price. Ratings agency Standard & Poor's placed
it under negative credit watch on Wednesday because of the
uncertainty over its future direction.
"It's nothing official yet, but they've asked a bank to go
and talk to possible buyers for Activision," said a source close
to the Vivendi board.
Activision Blizzard is the biggest U.S. video game publisher
by market capitalisation. Vivendi owns a 60 percent stake and a
sale could help the French group to raise up to $10 billion, the
Although a formal process has not started, bankers close to
Vivendi are sounding out cash-rich trade players, including
China's Tencent and U.S. duo Time Warner and Microsoft, as well
as private-equity heavyweights KKR, Providence and Blackstone,
banking sources said.
Microsoft and Time Warner declined to comment, while the
other four were not immediately available to comment.
Vivendi came under fire after a badly timed acquisition of
French mobile operator SFR at the beginning of the year, just
before new low-cost entrant Free Mobile dented margins and
market share, sending Vivendi's share price below 13 euros
Since Levy's departure the board has embarked on a strategic
review that could result in sporadic disposals, a Rupert
Murdoch-like split between the telecoms and entertainment
businesses or a full break-up of the company.
In addition to Activision and SFR, the group's businesses
include French pay-TV company Canal Plus, music label Universal
Music, Maroc Telecom and Brazil's GVT.
Activision is not considered to be among the core businesses
and is thought to be the easiest to offload. The company's six
times EBITDA valuation is viewed as affordable for the likes of
Tencent, Time Warner and Microsoft, as well as the large private
Tencent and Activision have already agreed to a partnership
that allows the internet and wireless services provider to offer
Activision's popular Call of Duty title as a free-to-play online
game in China. However, taking full ownership would remain a big
step for Tencent because the two companies have different
"They have two big franchises, Call of Duty on the console
side and World of War Craft on the MMOG (massively multiplayer
online game) side. And China is not a big market for console
businesses; online games are much bigger for various reasons,"
said a banker specialising in the sector.
Microsoft is another player with the necessary firepower,
but it is likely to be focused on the next generation of its
Xbox console. The source said: "They probably don't want to
distract themselves too much, but they are the ones who, if they
want to stay in games, would think about owning some of these
big franchises, not just providing the consoles."
Vivendi declined to comment on Activision and its general
disposal plans but said that "every option is on the table" and
that the board would take its time.
FIRST STEP TOWARDS BREAK-UP
According to bankers and analysts, a sale of Activision is
unlikely to move the needle much, given Vivendi's deep-rooted
Investors never really turned the page from the "Messier
era" - former CEO Jean-Marie Messier - when the group's
reputation was tarnished by a series of scandals.
Analysts at Bernstein Research pointed out that Vivendi's
shares have underperformed the Morgan Stanley Index for European
blue-chip companies in seven out of the 10 years since Messier
resigned in 2002.
"Investors remain spooked and the only way to change their
perception is to show a stronger leadership," said a source
close to the situation. Bold decisions, such as the gradual
break-up of the group, need to be taken, he added.
Bernstein Research analysts estimate that Vivendi could be
worth up to 29 euros a share if the board followed a concerted
programme to dispose of all of its assets. With 786,599 shares
to his name, Vivendi chairman Jean-Rene Fourtou could be tempted
to take this route.
Maroc Telecom and Canal Plus are other assets that could
come on the block, banking sources and analysts said.
Canal Plus, once a trophy asset, now looks one of the more
likely candidates for disposal in the medium term, a banking
source said, suggesting that new Vivendi shareholder Vincent
Bollore is a possible acquirer.
The source said: "Bollore always wears these two hats:
shrewd financial investor on one side and seasoned businessman
on the other. With him on board, everything is possible."