Leila Abboud is a former Bloomberg Gadfly columnist.

Billionaire Vincent Bollore only owns 20 percent of Vivendi SA, but he rules it as a king.

The corporate raider engineered the French media company's planned 3.9 billion-euro ($4.6 billion) takeover of advertising agency Havas SA, another company he owns a stake in. He plans to install his 37 year-old son Yannick, who now runs Havas, as Vivendi's CEO.

Shareholders could perhaps forgive the whiff of nepotism if the marriage with Havas made strategic sense. It doesn't, as I explained here. To make it worse, Vivendi is now likely to end up significantly overpaying.

Spot the Outlier
Advertising agencies are trading at lower multiples, except Havas thanks to Vivendi's bid
Source: Bloomberg

Since Vivendi said in May it would pay 9.25 euros in cash for each Havas share, the advertising industry has been sent reeling as big brands lower their marketing spending. Last week, Havas abandoned its annual target of 2 to 3 percent organic revenue growth after posting the second-lowest growth of its peer group. WPP Plc and Dentsu-Aegis have also been slammed.

Steep Valuation
Vivendi's bid values Havas at a much higher multiple than its peer group
Source: Bloomberg data

Vivendi's bid values Havas at about 11.8 times its enterprise value to forecast Ebitda for this year, according to the very latest analyst estimates. That's far more than the 8.5 average multiple for the agency's peers, according to data compiled by Bloomberg. Put it another way: Vivendi is paying about 40 percent more to buy Havas than competitors' current trading multiples would imply.

When you look at it on a price-to-earnings basis, the price still looks steep. The bid is worth 21.6 times this year's earnings. Havas's peers trade at about 13.4 times. That gulf is too wide to be explained by an ordinary takeover premium.

All this gives Vivendi shareholders cause to grumble, while Havas shareholders can only be relieved. If the shares weren't underpinned by the Vivendi bid, they surely would have fallen. Investors have a strong incentive to tender their stock when Vivendi opens its offer for the remaining shares on Sept. 21.

Bollore pere et fils would probably dismiss the critique of the deal as short-sighted. They have said that merging the two groups will create a stronger company that differs from all competitors. Infusing Havas' marketing savvy into Vivendi's content businesses will be great, they say.

I'd like to be proven wrong. But even if I'm right, there won't really be consequences for Bollore. A king, after all, isn't accountable to his subjects. 

--With assistance from Gadfly's Chris Hughes.

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

To contact the editor responsible for this story:
Edward Evans at