DETTA INLÄGG ÄR ETT UTDRAG UR KVARTALSBREVET JAG SKICKADE TILL PANDIUMS ANDELSÄGARE 2 FEBRUARI 2015.
Vivendi (VIV) is a French media conglomerate. Its main assets are Universal Music Group (UMG) and Canal+ Group. UMG is the world’s largest music label and Canal+ is a French television and movie studio and distributor. Vivendi also owns stakes in e.g. Numericable, Telefonica, Telecom Italia, Activision Blizzard and some other smaller companies.
VIV has not been performing well for the last 10 years. It has owned a lot of valuable assets but nothing has been done to realize the value. But that is changing. In 2012 Vincent Bolloré took a 5% position in the company and joined the Supervisory board. Vincent is a French investor with a history of restructuring poorly performing businesses. Since his entry VIV has changed their strategy to focus on its media assets and subsequently sold off non-core assets worth c. $35 billion.
A sum-of-the-parts valuation of VIV would indicate that it is worth closer to €30 per share compared to a price of below €20 when the Fund bought it. There is also some additional upside in the case. For example, once streaming becomes a larger share of music sales, UMG’s profits should increase substantially. (Streaming generates both higher revenues and higher profit margins to the music labels compared to physical sales and digital downloads. Compared to digital sales streaming could give an EBITDA contribution that is 2-3x larger.) Should this happen the value of VIV would increase another 10-15%. A potential spin-off of UMG could also further highlight the value of the different parts. In terms of downside, I think it is limited. VIV has strong positions in stable industries, a solid balance sheet and properly incentivized decision makers.