France's Vivendi isn't an easy company to understand. It made a big thing a couple of years back about ending its conglomerate status by dumping telecoms and video games businesses and focusing instead on its Universal Music division and Canal Plus pay-TV group.
So it's been interesting to watch this year as it bought a 20 percent holding in Telecom Italia as well as stakes in two French games-makers, Ubisoft and Gameloft. Some might argue that this reversal shows a frustrating lack of strategic consistency. Probably closer to the truth is that it's evidence of Vivendi, embodied by billionaire chairman Vincent Bollore, seizing opportunities where they crop up.
Bollore's position is also unusual. He owns 14.4 percent of the company, but seems to operate a great deal of control over its affairs. His grip will be tightened by a handy change in French law that will double long-term shareholders' voting rights
This means that Vivendi's buying into Telecom Italia, Ubisoft and Gameloft can only be seen as moves by Bollore. The Breton billionaire, a former vice-chairman of Italian insurer Generali, is well plugged into that country's business elite.
When pressed, Vivendi executives on Tuesday night's third-quarter earnings call said the Telecom Italia purchase wasn't a financial investment. Instead they repeated vague promises about co-operating with the Italian carrier. There was also little information about what Vivendi plans to do with the stakes in the video games companies.
So suggestions that Vivendi is acting like a conglomerate again aren't entirely convincing. With Bollore's involvement, it looks more like an activist hunting value in the public markets.
The question for Vivendi investors is whether any of this matters. Bollore is a respected corporate raider with a record of building minority positions in companies and getting them to change. If he can help encourage a sale of Telecom Italia's Brazilian business, for instance, that could unlock value and boost the price of Vivendi's holding. When he first emerged on the Vivendi shareholder register in late 2011, people spoke of the positive "Bollore effect" on the company's shares.
Yet a look at Vivendi's performance since then shows following a billionaire's lead doesn't guarantee success. The total return on its shares over the past four years (assuming dividends were reinvested) has been 73 percent, according to data compiled by Bloomberg, equivalent to about 15 percent each year. That's not shabby but it's less than the 24 percent annually you'd have got from an index of European media stocks over the same period, and slightly lower than the 16 percent from the CAC 40 index of leading French companies.
Vivendi's third-quarter results were not exactly stellar either, missing analyst estimates, which Bloomberg Intelligence blamed on "corporate investments eating into already weakened profitability at Canal Plus and the music business." Shareholders are concerned about what it plans to do with 8 billion euros ($8.6 billion) of net cash.
Of course, Bollore developed his reputation for a reason. His 11-year involvement in advertising group Havas has generated benchmark-beating returns, while he doubled his money on a stake purchase in British ad firm Aegis. Entrepreneur Xavier Niel's decision to follow him by taking a position in Telecom Italia shows at least one other French billionaire thinks that's a smart call.
But you could still argue that if Vivendi shareholders want to buy into Telecom Italia then they can do so directly. As the recent faltering of the Bollore effect at Vivendi shows, even billionaires find it difficult to be always on the money. Vivendi shareholders need more clarity on the plans for Telecom Italia, the games-makers and the 8 billion euros of cash.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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