Vivendi/Dan Loeb: gatecrashers have slim chance of beating Bolloré
Activist investors must keep their nerve to influence the party
Good parties attract gatecrashers. Vivendi’s proposed spin off of Universal Music Group is as grand a fête as you can imagine. No wonder Daniel Loeb is in on the fun that has attracted fellow activists such as Francesco Trapani of Bluebell Capital.
One attraction may be hostility among some independent shareholders to the French media conglomerate’s plan for a complicated demerger of the world’s biggest music label. Another could be the chance to mess with a transaction involving fellow activist Bill Ackman.
But on the face of it, there is not much gatecrashers can do to stop the music. Billionaire and former Vivendi chair Vincent Bolloré holds 30 per cent of voting rights.
The separation will be via a “dividend-in-kind” structure. This will mean 60 per cent of Universal’s equity being spun off and listed in Amsterdam. Vivendi shareholders will receive shares as a special dividend.
The problem is that minority shareholders face big tax liabilities. It explains why Bluebell has asked Vivendi to pay shareholders an additional cash dividend of about €3.3bn.
It is a legitimate gripe. Even more so given that Vivendi is in talks to sell half of its remaining 20 per cent stake in Universal to Ackman’s “blank cheque” company. Investors are right to ask why Ackman should be able to buy into UMG without incurring similar tax liabilities.
The question is what leverage dissenters can exert to extract better terms or even derail the UMG separation altogether.
Vivendi needs only a simple majority of 50 per cent to approve the spin-off. Bolloré’s holding company owns a 27 per cent stake in Vivendi, controlling the group with 29.73 per cent of the voting rights. A big backlash from minorities would be required to defeat him.
Activist investors should stay on board even so. Bolloré could be tempted to use proceeds from the Ackman deal to fund a buyback of Vivendi’s shares, extending his control over the business. Determined gatecrashers have stamina as well as cool nerves.