Vivendi’s Change Of Fortunes

A measure of Vivendi’s remarkable change of fortune is that it’s only taken four years to go from debts of about euro 35 billion to turning down a buyout offer of euro 40 billion.

If the Paris-based media and telecom company, which has Universal recording and publishing companies, had taken the money from the U.S. money men at Kohlberg Kravis Roberts, it would have been the world’s biggest buyout.

By the time the U.K.’s Financial Times reported the story November 4th, it seems the bid had already been turned down.

The paper said the French media and telecommunications conglomerate is a tricky target, partly due to the fact that the first option on buying some of its companies has already been agreed, although it’s still attracted a couple of bids this year.

Norwegian investor Alexander Vik proposed a breakup in May, even though he didn’t have the finance in place and backed off raising it when the move got a cool reception from the Vivendi board.

At the beginning of October, KKR – a leveraged buyout house – started looking at the books, although some sections of the U.K. media say it didn’t actually get to the point where a formal offer was made.

A leveraged buyout is made harder by the fact the company’s free cash flow was about euro 1.8 billion last year, which is only enough to support half of the amount either Vik or KKR would need to raise to buy it.

Vivendi will learn if one of its own purchases will be allowed to go ahead on December 8th, when the EU regulators will rule on Universal Music Group’s euro 1.63 billion bid to buy BMG Music Publishing.

The deal to buy BMG, which is owned by German publishing giant Bertelsmann AG, needs clearance from regulators on both sides of the Atlantic.

It’s likely to face close scrutiny in Europe, where the Court of First Instance has already overturned the regulators’ decision to allow the merger of Sony and Bertelsmann’s recorded music businesses.

That deal, which reduced the number of major music companies from five to four, needs to be re-examined, and analysts warn that it will be difficult to get clearance for any similar mergers in the future.

The European Commission has already said it intends to watch the music sector closely to check that antitrust rules are not broken.

The Court of First Instance said the regulators had not properly shown that the deal wouldn’t create a monopoly in the recording industry.

– John Gammon