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Vivendi Board Meets to Seek End of Monthlong SFR Bid Dispute

Vivendi Headquarters in Paris
The Vivendi logo sits on display outside the headquarters of Vivendi SA, the French conglomerate that owns phone company SFR, in Paris. Photographer: Balint Porneczi/Bloomberg

Vivendi SA will hold a supervisory board meeting today as it edges closer to a decision over the sale of French phone unit SFR, subject of a monthlong bidding war between cable tycoon Patrick Drahi and Bouygues SA.

The gathering will determine whether Drahi’s Altice SA, after three weeks of exclusive talks with Vivendi, can close in on a proposal to create a 20 billion-euro ($27.4 billion) telecommunications giant by merging its Numericable Group with SFR. Bouygues, the construction conglomerate led by Martin Bouygues, raised its bid twice and brought in a government-controlled fund to back its offer.

The fight for SFR, whose previous owners included Vodafone Group Plc, represents a milestone in European carriers’ push to merge in response to stricter regulations and increased competition. The European parliament yesterday voted in favor of plans to eliminate mobile roaming fees within the European Union. Even without that, French prices have fallen by more than 30 percent since Iliad SA became the fourth carrier in 2012.

The French market is “in a very pressured state,” Nuno Matias, an analyst at Banco Espirito Santo SA, said by phone. “Once you get the prices down, it’s very difficult to get the prices to go back up.”

Altice’s bid includes 11.75 billion euros in cash and a 32 percent stake of the entity created from a combination of Numericable with SFR. It says the new company is valued at 20 billion euros including debt.

Decision Time

Bouygues’s offer, comprising 11.3 billion euros in cash and a 43 percent stake in the company created from a merger of SFR with Bouygues Telecom, and a subsequently sweetened proposal giving Vivendi 13.15 billion euros cash and a 21.5 percent stake, are both valid through April 25.

Vivendi could choose to reach a final agreement with Altice today, extend the exclusivity period with Drahi’s company, decide to proceed with talks with Bouygues or reopen the bidding process, according to people familiar with the matter, who asked not to be identified because the deliberations are private.

A representative for Paris-based Vivendi declined to comment. In its March 14 statement, Vivendi said its supervisory board would meet at the end of the three-week period “to examine the next steps and to decide if it should put an end to the other options envisaged.”

Spinoff Plan

The separation of SFR started last year as a spinoff plan, part of Chairman Jean-Rene Fourtou’s promise to split Vivendi into two companies focused on telecommunications and media, respectively. Vivendi also owns Universal Music Group, pay-TV company Canal+ and Brazilian broadband provider GVT.

Vivendi fell 0.4 percent to 20.40 euros at 9:25 a.m. in Paris and Numericable rose 0.9 percent, while Bouygues slid 2.1 percent. Altice added 1.6 percent in Amsterdam.

If a sale of SFR is completed, it could surpass Actavis Inc.’s agreement to buy Forest Laboratories Inc., making it the second-biggest acquisition globally announced this year, data compiled by Bloomberg showed. Comcast Corp.’s bid for Time Warner Cable Inc. is the largest. An acquisition could also provide one of the biggest financing deals to loan bankers in Europe this year.

Bouygues’s offer is supported by French politicians including Industry Minister Arnaud Montebourg. Its sweetened bid includes a 300 million-euro investment by state-owned Caisse des Depots et Consignations. CDC Chief Executive Officer Jean-Pierre Jouyet told reporters yesterday it would respect any decision, calling Vivendi’s board “autonomous.”

“In Europe we’re going to see a restructuring of the telecommunications industry,” Jouyet said. “There are more than 80 operators in Europe, four in the U.S. and two or three in China. Try and see what’s wrong.”

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