Vivendi valuation: a big discount to NAV and an important asset for Bolloré

Here is my attempt to value Vivendi which is an important asset for Bolloré.

For the major holdings, I tried to give them a very conservative fair value and not stick to the market price.

Valuation by multiples is always subjective and you can tweak the multiples accordingly.

The main assets for Vivendi’s NAV are the following ones:

1. Canal +: 6 180 M€ (33,3%)

2. UMG: 4 545 M€ (24,5%)

3. Havas: 2 860 M€ (15,4%)

4. Lagardère : 1 967,5 M€ (10,6%)

5. TIM: 946,4 M€ (5,1%)

6. MediaForEurope: 843,1 M€ (4,5%)

7. FL Entertainement : 813,3 M€ (4,4%)

8. Multichoice : 635,9 M€ (3,4%)

Vivendi sum of the parts valuation: NAV per share 18 € and 53,9% discount to share price.

As a reminder:

Havas was valued at 3,9 billion euros when Bolloré sold it’s 25% to Vivendi (many thanks to Philippe Luchési which you can follow on his twitter handle: @LuchesiPhilippe ). That valuation was high but nevertheless gives us a potential upside if Havas keeps growing. I took the decision to stand by a 10* multiple EBITA

Lagardère’s valuation at 24,1€ per share doesn’t reflect its true fair value as we can imagine that if Vivendi offered that price is that they think it is worth more. So we are on the conservative side.

We do not yet have the selling price for Gala but it will not have a massive impact on NAV.

I do not own a single Vivendi share as I think that Compagnie de l’Odet and other Bolloré galaxy entities gives us better margins of safety and ensures us a better alignment with Bolloré.

Vivendi can increase its stake in Lagardère above 57,35%. Indeed, the main offer (25,5€ dividend included) enabled them to get 17,2 million shares bringing their ownership to 57,35%. There is also an alternative offer (24,1€) which will expire on the 15^th of December 2023. On the 31/06/2023, 700 264 rights were exercised (700 264 additional shares will be acquired by vivendi) thus representing an additional 0,5% stake. It will be interesting to see in the end how many additional shares they will get. They can potentially acquire up to an additional 21,75% of Lagardère.

FL entertainement: there is a lock up period until the 31/12/2023. Until that date, Vivendi and other shareholders cannot sell their shares.

MediaForEurope. I took the average price (1,5€) which was agreed upon in the compromise.

Management incentives are classic but also linked to Vivendi share price evolution as well as to Lagardère and Editis operations

There are two incentives.

The first one is the performance share allocation plan where the indicators are:

• the adjusted net earnings per share (50%);

• operating cash flow after interest and tax (20%) assessed at group level;

• reduction of Vivendi's carbon footprint (10%) assessed at group level;

• external indicators (20% weighting) related to Vivendi share performance against the STOXX® Europe Media index (10%) and the CAC 40 (10%).

The second one is the annual variable remuneration where the indicators are linked for:

• 35% to the adjusted operating income (group EBITA);

• 25% to the net operating cash flow after interest and taxes;

• 10% to the progress of the Lagardère-Editis operation:

• up to 5% for the sale/exit of the capital of Editis 100% by Vivendi,

• up to 5% for the implementation of the process of transition of Editis and Lagardère,

• and 15% pursue the development of Vivendi's strategy by shareholders and other stakeholders and 15% implement actions integrating environmental, social and governance (ESG) issues.

We have an important discount (53,9% with a 8,3€ Vivendi share price) to the NAV. Not all the holdings will work out perfectly nevertheless we can see that there is an important discount…

Sure the following facts didn’t help :

• Vivendi announced that buybacks won’t be their priority ,

• Bolloré did not launch an offer on Vivendi (market was expecting it but IMO it will only happen when the market expects the least, remember Bolloré is unpredictable).

• Bolloré sold some Vivendi shares to stay under the 30% threshold.

You have already guessed the next companies I will be analyzing: UMG and Lagardère.

Cheers!

Jeremy

In the meantime, thanks again for signing up and feel free to talk to your friends / fellow investors about the French Hidden Champions Substack. You can also reach out by email or by DM on Twitter @FoxCastlehold.

Disclaimer: The above article constitutes the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. The authors may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. Disclosure – I hold a position in the Bolloré Galaxy entities but do not hold a position in Vivendi at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).