Deals

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

For a man nearing retirement age, French billionaire Vincent Bollore has a lot on his plate. The 64-year-old has a busy year in prospect at Vivendi, the media company he effectively controls through a minority stake, and at family holding firm Bollore Group. The fates of both look set to become more closely entwined.

At Vivendi, there's the small matter of the audacious corporate raids on Silvio Berlusconi's Mediaset SpA and video games maker Ubisoft Entertainment SA -- against the opposition of both their founding families. He's doing this while trying to resuscitate Vivendi's pay-TV business, its biggest revenue provider.

Meanwhile, he's weighing up whether to prod Vivendi into buying his advertising agency Havas, 60 percent-owned by Bollore Group. That would be hard to justify strategically, but it's a way to cut Bollore Group's uncomfortably high debt, and might even allow the Bollores to consolidate Vivendi in its accounts.

As Bollore juggles many balls, he's about five years away from handing the empire to his four children. He plans to step aside in 2022 on the 200th anniversary of Bollore Group.

It's this personal investment that should make Bollore Group more of an attractive prospect than Vivendi, if shareholders want to ride the coat-tails of the Breton-born billionaire. Or at least avoid getting gored.

Vincent Bets
Bollore Group is made up of operating businesses and a portfolio of financial stakes
Source: Oddo report, Dec 3, 2016

It’s the place where his interests align best with the fate of the company. At Vivendi, one can't be sure that Bollore won't put his own concerns first on everything from buybacks to deal-making, as the Havas idea shows. The same's true at the family company, of course, but at least you know it's his priority.

To be clear, Bollore Group is no paragon of corporate virtue, nor does it have an infallible business model. It suffers from a comically convoluted structure intended to cement family control. HSBC has calculated that Bollore Group owns 53.9 percent of its own capital through lots of holding companies, while the family owns only 4.6 percent directly. Financial disclosure is sparse, governance minimal. Four of 15 board members have the last name Bollore; only two can be considered truly independent.

All this means the Bollore Group trades at a discount to its net asset value.

Yet, to go all French for a moment, the group is the purest expression of the duality of Vincent Bollore. He's a patient builder who's let his company spend more than 2 billion euros on a novel lithium battery that's yet to earn a cent. And he's also a ruthless raider whose maneuvers have earned billions from pipe-maker Vallourec SA and Havas.

Investors get both incarnations. They get the operating businesses, where the African ports, railways and logistics activities generate 80 percent of operating income:

Slow and Steady
Bollore Group revenue has risen over 10 years. Its operating profit comes mostly from Africa
Source: Bloomberg

They also get a portfolio of financial assets worth about 6 billion euros at current valuations. The largest is the 20.7 percent Vivendi stake. Think of it as a mini-investment fund run by Bollore -- the spoils of his raids plus a few vineyards in Provence thrown in.

There are risks though. The company's return on invested capital hasn't exceeded its cost of capital in more than a decade, according to Bloomberg data. Bollore Group also borrowed heavily to buy more Vivendi shares: net debt is a worrying four times Ebitda.

Nevertheless, shareholders have done well with Bollore over the past decade:

Brittany Style
In the past decade, Bollore Group has delivered total returns of 160 percent versus 60 percent for the Dow Jones Industrial Index, and an 11 percent drop for the French CAC 40 index.
Source: Bloomberg

A torrid 18-month period during which the stock last lost half its value has ended, with shares rallying 25 percent since mid-November. They're still trading below historic multiples.

Of course, the concerns around governance and low capital returns might have you running for the hills. But if you really must follow Bollore Pere, this might be a better way than Vivendi.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Leila Abboud in Paris at labboud@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net