Vivendi’s Fourtou Committed to Universal Music Strategy

Vivendi Chairman Jean-Rene Fourtou
Vivendi SA Chairman Jean-Rene Fourtou. Photographer: Charles Ellena/Bloomberg

Vivendi SA Chairman Jean-Rene Fourtou, who stepped in to oversee the French company’s strategy following the ouster of Chief Executive Officer Jean-Bernard Levy, is committed to Universal Music Group as he seeks a buyer for the video-game publishing division.

In a letter to employees of the Universal Music unit obtained by Bloomberg News, CEO Lucian Grainge said Fourtou told him at a meeting that the chairman supports the “strategic ambitions” of the world’s largest music company, including its 1.2 billion-pound ($1.9 billion) takeover of EMI Group Ltd.’s recorded music business that’s under review by regulators.

Levy’s departure last week, triggered by a clash with the board over strategy, may accelerate a reorganization of Vivendi which includes scenarios from major asset sales and to a breakup of the Paris-based telecommunications and media company. Vivendi is looking for a buyer for its $8.1 billion stake in video-game company Activision Blizzard Inc., a person with knowledge of the matter said yesterday.

“Mr. Fourtou, I am glad to say, is an enthusiastic music fan,” Grainge said in the letter. “Mr. Fourtou is committed to Universal’s strategic ambitions, which include our evolving services to artists and determination to help digital music grow further for our business partners and consumers.”

Conglomerate Discount

Vivendi’s other divisions include French wireless company SFR, pay-TV operator Canal Plus as well as telecommunications providers in Morocco and Brazil. Fourtou has highlighted the group’s “conglomerate discount,” which he estimated at about 40 percent in April. The stock has risen almost 9 percent since Levy’s ouster.

Universal agreed in November to buy EMI’s record labels, home to Katy Perry and Coldplay. European Union regulators and the U.S. Federal Trade Commission are assessing whether the acquisition would be anti-competitive. The combined company would control 41 percent of the recorded music market, according to Public Knowledge, a Washington-based consumer group that opposes the deal.

European regulators have a Sept. 6 deadline to rule on the transaction. Universal Music may not be sufficiently constrained by smaller competitors, customers’ buying power or illegal music downloads, the EU said when it opened an in-depth probe in March.

First-quarter revenue at the music division climbed 9.1 percent to 961 million euros ($1.2 billion), accounting for 13 percent of Vivendi’s 7.1 billion-euro total. Earnings before interest, taxes and amortization rose 48 percent to 68 million euros, or 4 percent of the group’s 1.62 billion euros.

Activision Disposal

Activision sales declined 16 percent to 894 million euros in the period, while Ebita fell 21 percent to 395 million euros.

Should no buyer emerge for the 61 percent holding in the Santa Monica, California-based video-game publisher, Vivendi plans to sell some shares in the market, said the person with knowledge of the matter, who sought anonymity because the plans are private.

A Vivendi spokesman didn’t respond to an e-mailed request for comment outside of business hours in France. Cassandra Bujarski, an outside spokeswoman for Activision, had no comment.

Activision, the largest U.S. video-game publisher, rose 4.4 percent to $11.99 on June 29 in New York. The shares have declined 2.7 percent this year. Vivendi gained 3.1 percent to 14.63 euros in Paris, and is down 11 percent this year. The stock reached a nine-year low of 12.01 euros on April 19.

Growth Concerns

Activision trades at 14.4 times trailing earnings, according to data compiled by Bloomberg, below the 25.4 in fiscal 2010 and a five-year of high of 67.6 in 2007. Electronic Arts Inc., the second-largest game company, trades at 30 times trailing profit.

The multiple reflects investor concern over growth prospects during a transition phase for the video-game industry with the introduction of the first new consoles in seven years, said Edward Woo, an analyst with Ascendiant Capital Markets LLC in Irvine, California.

Industry growth is now taking place on social-media websites such as and away from traditional family room consoles from Microsoft Corp., Sony Corp. and Nintendo Co. U.S. sales of packaged games like those played on Xbox or PlayStation fell 6 percent to $8.83 billion last year, according to researcher NPD Group Inc.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE