Vivendi Chief Levy Steps Down After Strategy Differences
Levy is departing after 10 years at the telecommunications and media company, including seven years at the helm, Paris-based Vivendi said in a statement today after a meeting of its supervisory board. General Counsel Jean-Francois Dubos was appointed to head the management board. Vivendi has hired a headhunter to look for a permanent CEO, said a person with knowledge of the matter who asked not to be named because the plan isn’t public.
Vivendi jumped as much as 7.5 percent on the Paris exchange today after people familiar with the matter told Bloomberg News that Levy was preparing to step down. The 57-year-old was criticized by shareholders for failing to tackle the low valuation of the owner of Universal Music Group and phone divisions in France, Morocco and Brazil. Vivendi has been considering an overhaul of its structure, including a possible sale of video-game publisher Activision Blizzard Inc. (ATVI) and a spinoff of pay-TV unit Canal Plus, people familiar with the matter have said.
“Levy’s resignation makes it more likely that we’ll see steps toward structural changes, since he was seen as a defender of the group’s structure” said Mirko Maier, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. “The likelihood of major asset sales or even a split-up is increasing.”
Vivendi rose 74.5 cents, or 5.5 percent, to 14.20 euros at the close of trading on the Paris exchange, paring the stock’s decline this year to 13 percent and valuing the company at 18.3 billion euros ($22.7 billion).
Michel Combes, the Vodafone Group Plc (VOD) executive who was due to join Vivendi as head of the SFR French mobile-phone unit on Aug. 1, will no longer take that role. Instead, Vivendi’s head of personnel, Stephane Roussel, will become SFR CEO, it said today.
Levy and supervisory board Chairman Jean-Rene Fourtou have disagreed for months over the need to revamp Vivendi’s structure, people familiar with the situation said. The CEO resisted major asset sales or a breakup of the company he helped build up when he acquired Activision and Brazilian phone operator GVT, and negotiated a deal on SFR, the people said.
The differences between the two executives’ views were apparent during last weekend’s management summit, and were exacerbated by a U.S. court decision this week to fine Vivendi $956 million over a 2001 transaction with Liberty Media Corp. (LMCA), they said.
Levy’s departure follows “a divergence of views on the strategic development of the group,” Vivendi said in its statement. “The supervisory board wishes to thank Jean-Bernard Levy for his contribution over the last ten years alongside Jean-Rene Fourtou.”
Another global media company today bowed to shareholder pressure for a reorganization. News Corp., the media empire controlled by Rupert Murdoch, said it plans to separate into two units after its board approved a split of publishing assets from entertainment businesses.
Through yesterday, Vivendi shares had fallen more than 30 percent since Levy announced his latest deal in April 2011 -- the 7.95 billion-euro buyout of the SFR venture with Vodafone. Cheaper phone packages from competitor Iliad SA (ILD) have since cut into SFR’s profit, and now Vivendi doesn’t expect earnings for the entire company to grow again until 2014.
Levy joined Vivendi in 2002 as chief operating officer after an acquisition binge under former chief Jean-Marie Messier left it on the brink of collapse. After rising to CEO, Levy blocked Norwegian investor Alexander Vik’s attempt to break up the company in 2006.
Moody’s Investors Service and Fitch Ratings added pressure this week, saying Vivendi’s debt ratings could be threatened unless the company shows that it can reduce its liabilities. Vivendi’s net debt increased to about 12.5 billion euros at the end of March, nearing the level reached a decade ago.
Fitch yesterday cited potential legal damages related to a the verdict this week in a U.S. lawsuit over Vivendi’s 2001 purchase from Liberty Media of a stake in USA Networks Inc. Vivendi said it would appeal the ruling.
Also weighing on Vivendi’s debt is the takeover of EMI Group (EMIS)’s recorded-music business by Universal Music. European regulators have a Sept. 6 deadline to rule on the deal, which they have said would create a company almost twice the size of the next-largest player in Europe. Universal 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.
Vivendi failed to shed light on its long-term strategy after a meeting of top executives last weekend outside Paris. Instead, Levy told a private gathering of investors in London on June 26 that he would focus on cutting costs at SFR, people with knowledge of the matter said.
SFR’s top union representative, Geoffroy de Vienne, wrote today in a letter to Levy, Fourtou and Roussel that the management must come up with an “industrial strategy.”
Levy and Fourtou already faced calls to change managers and invite new members to the board at Vivendi’s shareholder meeting earlier this year.
“Our conglomerate discount has become gigantic, close to 40 percent,” Fourtou said on April 19 in Paris. “We will not stay idle, and there are no taboos about how we will tackle this. We will look over our strategy, our perimeter and our image among investors.”