Vivendi has written a letter to the US hedge fund and minority shareholder that has challenged its strategy, warning that it could fall foul of French law in the event that it tried to form a united front with other shareholders.
The missive to P Schoenfeld Asset Management (PSAM) is the latest sign of mounting tensions between the Paris-based media and content group and some minority shareholders over the company’s plans under chairman Vincent Bolloré.
The letter from Vivendi’s management addressed to the New York-based activist investor states: “In so far as it would appear that your direct or indirect share ownership, together with that of third parties with whom you might join forces, could surpass the 20 per cent threshold, this could be seriously prejudicial to the company.”
It continues: “We would be forced to promptly bring legal action against you to seek joint and several damages. The damages, according to a preliminary analysis of our expert consultant, resulting from the harm that would be created by your actions, could amount to between €5bn and €9bn.”
The letter says that French law prohibits foreign nationals from outside the EU from owning more than 20 per cent of a company with a television licence which is considered an asset of national strategic interest. Vivendi owns Canal Plus, the pay-television business.
Peter Schoenfeld, PSAM’s chief executive, told the Financial Times: “We are surprised by the letter and have been very compliant.”
He added: “We believe they are trying to distract from the legitimate issues that we are putting forward with respect to the distribution of cash to all shareholders.”
PSAM’s response to Vivendi, said it was “very disappointed to have received this letter . . . whose purpose seems to be to intimidate us. We consider this behavior totally unacceptable”.
PSAM asked Vivendi publicly to disclose information relating to its monitoring of the 20 per cent threshold.
It also said that it considered “speculations at the end of your letter, regarding our willingness to favor the acquisition of Vivendi assets by interested third parties to be libelous or at best, gratuitous”.
The investor, which holds 0.8 per cent of Vivendi stock, called on shareholders this week to vote at next month’s annual meeting to force Vivendi to pay out €9bn in dividends this year.
Challenging Mr Bolloré’s strategic vision, the hedge fund said on Monday that its €9bn proposed payout was the best way to reward investors now that Vivendi found itself sitting on a mountain of cash following asset sales during the past two years of more than €35bn.
“PSAM believes that Vivendi is significantly undervalued due to its excessive cash holdings, inadequate capital return policy and the uncertainty over Vivendi’s future use of its capital,” it said.
Meanwhile, PhiTrust, another minority shareholder, wants Vivendi to exempt itself from a new French law that would give longer-term shareholders such as Mr Bolloré twice as many votes as new investors.
The demands follow widespread investor disappointment last month after the group, which owns Universal Music Group (UMG) alongside Canal Plus, said that it expected to return €3bn to shareholders via three annual dividend payments.
It also said that it could return up to an additional €2.7bn via a share buyback programme at a maximum of €20 per share — well below the group’s current share price.
Mr Bolloré and Vivendi management have said they will urge shareholders next month to vote against PSAM’s proposals. “Such a distribution level would significantly reduce Vivendi’s financial flexibility and jeopardise its development strategy,” the company said on Tuesday.
In the countdown to the annual meeting on April 17, Mr Bolloré tightened his grip on Vivendi this week, buying an additional 27.7m shares for €632m, and pushing his stake to 10.2 per cent — double what it was only a month ago.