Vivendi: Bolloré’s master plan -
http://on.ft.com/1TYrZvL
The media group chairman believes he can compete with global players, but is his strategy right?
Vincent Bolloré thinks Vivendi’s time has come. The French industrialist, entrepreneur and sometime corporate raider has spent the past two years behind the scenes at Vivendi remodelling the Paris-based media group, of which he is chairman, to bring it into focus for the 21st century.
The process has involved a shopping spree of more than €4bn across Europe, made possible thanks to a €35bn assets sale, primarily to reduce debt, before Mr Bolloré became chairman in June 2014. But the acquisitions raise more questions than they answer. Even people in the tightly knit world of French banking, where secrets rarely last long, admit to not understanding what the 64-year-old billionaire is up to.
Mr Bolloré concedes that Vivendi’s recent investments in the telecoms and video-gaming industry — precisely the areas it exited before he became chairman — may look confusing. “It’s like a painter,” he tells the Financial Times. “You may not know why there’s a blob of blue and a dash of brown but in the end you will see that we are painting something that is relevant.”
For Mr Bolloré, “relevant” means establishing Vivendi as a southern European powerhouse able to compete for audiences with some of the world’s biggest media and content groups — in one breath, he mentions Walt Disney, Time Warner and Rupert Murdoch.
He claims that Vivendi now has all the assets it needs to successfully challenge the industry’s dominant players. “We don’t need to make any big acquisitions,” he says. “If you look at the plan, we already have all the parts we need.”
King of content
There is little doubt that Vivendi needed to do something. The group, which began life under Napoleon III as a water utility, had long suffered a conglomerate discount in its share price. Some investors had begun to ask an uncomfortable question: what was the justification for its existence?
Yet Mr Bolloré’s vision of turning Vivendi into a global media force has its detractors. Analysts point to the relatively small size of southern Europe’s audiovisual market compared with that of the US. They also question prospects for growth in a region whose economies, with perhaps the exception of Spain, have been stagnant for years.
More generally, they argue that Vivendi’s desire to achieve synergies across music, film and television plus video-gaming has proved an elusive goal. Across the Atlantic most media companies have moved away from the idea that there are such savings to be found. Even Walt Disney, perhaps the world’s most recognisable media brand with a vast library of intellectual property, has shifted strategy lately, closing down its video games division and moving to a licensing model instead.
“There is no evidence that there are synergies,” says one person in the financial community who has followed Vivendi for years. “Can you take a movie and ensure that it only uses material from your music company? Yes, but is it worth owning a music company to do that?”
The same person also questions Mr Bolloré’s strategy at a time when the shift to digital has created new competitors — Apple, Amazon, Google — capable of threatening groups far bigger than Vivendi. “You’re starting as a minnow in a pond with big fish but even bigger fish are coming along,” he says. “The plan looks extremely vague.”
Mr Bolloré is unfazed. He points to Vivendi’s Universal Music Group, by far the world’s largest recorded music company with revenues last year of €5.1bn. Canal Plus, the Vivendi-owned network, stretching from pay-TV channels to Studio Canal, its film production and distribution unit, generated revenues of €5.8bn last year. A third strand of the new Vivendi — video gaming — is also taking shape, says Mr Bolloré.
Since October, the group has built a 17.7 per cent stake in Ubisoft , the French games developer; in February, it launched a tender offer for Gameloft, another French producer. On Wednesday it said preliminary results of the offer had left it in control of 61.7 per cent of the group.
“We have got Universal Music, we are getting into video games and we are investing in movies, series and shorts,” says Mr Bolloré. “The idea is to deliver the content through a galaxy of relationships with telcos.”
At home in France, he would like to strike a deal either with Orange, the biggest mobile provider, or Free, the low-cost operator controlled by entrepreneur Xavier Niel.
But his biggest bet so far has been the €3bn investment in Telecom Italia, turning Vivendi into the Italian group’s biggest shareholder with a 24.7 per cent stake. In April, he followed up with another Italian deal — this time with Mediaset as Vivendi took a 3.5 per cent stake in the broadcaster as well as full control of its pay-TV business. The deal ratchets up competition with Mr Murdoch’s Sky empire, which has united its business across the UK, Italy, Germany, Ireland and Austria under a single group, say industry experts.
Mr Bolloré insists that Telecom Italia should not be confused with Vivendi’s core activity. “We are in telecoms but it is complementary to content,” he says. “We don’t want to be an operator. We don’t want, industrially speaking, to manage a telecoms company. We manage content . . . We don’t manage Telecom Italia and we will never manage it.”
That said, Vivendi managed to replace the chief executive in March after securing four seats on Telecom Italia’s 18-member board in December.
Mr Bolloré has a reputation as a long-term empire-builder but he is also infamous as an opportunistic investor. In 1997, he bought a 12.5 per cent stake in Bouygues with a view to gaining board seats and a grip on the French construction and telecoms conglomerate.
A year later, after a punishing fight with the controlling family, he gave up — but not before notching up a reported $210m profit. More recently, he pulled off a similar manoeuvre at UK-based Aegis, walking away with a reported €450m.
The ability to change course quickly when he sees an opportunity has left analysts wondering exactly which Bolloré has invested in Telecom Italia — the long-term strategist or the short-term tactician. In particular, they wonder why it was necessary to invest directly in the Italian operator rather than strike a commercial agreement when Vivendi’s peers have been moving away from the marriage of content and distribution, to focus on one or the other.
Mr Bolloré defends the deal, saying it has helped “develop privileged relationships” adding that it also helped smooth the Mediaset agreement. He rejects the suggestion that putting money into Telecom Italia is driven by a bet that it could become a takeover target if and when consolidation in the European telecoms industry takes place.
“We don’t want to sell, we are happy in Italy and we are happy as a long-term shareholder,” he insists.
Wielding the axe
His most immediate challenge is Canal Plus’s French pay-TV business, which, unlike the rest of the unit, is losing money — an estimated €400m this year — as it wrestles with falling subscriptions and competition from rival platforms plus the escalating cost of securing exclusive sports rights.
In what has become something of a pattern, Mr Bolloré stepped in to become chairman of Canal Plus and fired some senior managers. The move last year created a storm in France — not least because it was seen as meddling with the network’s irreverent image.
Mr Bolloré insists it was necessary. “You can’t say that the house is OK just because the fire is in the basement when you are on the first floor,” he says. “When you have a problem, the important thing is to talk about it.”
Investing more in original content, overhauling set-top boxes and implementing a proposed commercial agreement with beIN Sports will help return the channels to profit by 2018, he says.
Some observers have drawn parallels between Mr Bolloré’s reign and that of Jean-Marie Messier, whose ultimately ill-fated transatlantic deals as the head of Vivendi in the late 1990s momentarily thrust the group, and France, to the centre of the global corporate stage.
He argues that Mr Messier’s vision for Vivendi was correct. “Jean-Marie was right in terms of the merger of content and the distribution network,” he says. “Everyone is doing that now.”
The big difference, he argues, is that Mr Messier was not a leading Vivendi investor. In recent years, Mr Bolloré has used his fortune — Forbes ranks him the 11th richest person in France with a net worth of $5.3bn — to gain a 14.3 per cent stake in Vivendi, becoming its biggest shareholder, for a cost, he says, of €4bn.
France’s so-called Florange law, which grants long-term shareholders double-voting rights, has made his position even more dominant. In the case of Vivendi, which has a market capitalisation of €24.2bn, that has left him holding 25 per cent of the voting rights.
Over his career, Mr Bolloré has made an art form of using minority shareholdings to gain control in a company. In 2004, in one of the most prominent examples, he bought 5 per cent of French advertising group Havas — the same size as his original holding in Vivendi four years ago. Within months he took seats on the board, removed the president and gained control.
At Ubisoft, the founding Guillemot family is worried about suffering a similar fate. In February, Yves Guillemot, Ubisoft’s chief executive, said: “We want shareholders to have the right information about where we are going and how we will get there, and to understand how dangerous creeping control could be”.
As chairman and minority shareholder at Vivendi, Mr Bolloré has attracted scrutiny over issues of corporate governance. Activist shareholders have openly questioned his style with one branding the Bolloré group’s purchase of Vivendi shares “opportunistic”.
The appointment to the Vivendi board last month of Yannick Bolloré, his son and chairman and chief executive of the Bolloré family’s majority-owned Havas, turned heads. Bolloré senior says he fails to understand why. “It should not be a negative,” he says. “I don’t understand. It’s normal when you invest somewhere to have shareholders around the table. I would love to know why it’s a problem.”
With Yannick’s arrival, the Bolloré group now has two seats on Vivendi’s 14-member board. But it is also the seventh board change since Mr Bolloré became chairman. He says that all the other members are fully independent, but one investor last year told the FT: “He is clearly stacking the board.”
Mr Bolloré insists that his presence has given the group the time it needed to devise a strategy. He dismisses suggestions that he controls everything and says that he takes a back seat. However, when he overhauled Canal Plus last summer, the FT reported that Mr Bolloré even suggested a joke for Les Guignols, a satirical TV show starring latex puppets. “It is not true,” he says. “I am very involved because I am the chairman of the supervisory board but I have a team . . . I am not active.”
He adds: “I don’t do much at Vivendi. I create the atmosphere, I take part in the nomination of people but it’s those people who are doing everything.”
Publicly, Mr Bolloré avoids setting targets. He talks instead of the importance of a long-term vision.
“For the past 30 years, we have built a worldwide organisation, step by step,” he says of his own Bolloré Group. “With Vivendi, it’s the same. We have a plan. You can say it’s a stupid plan. But it is our plan.”
