Bluebell Capital hedge fund activist continues its success countryside to Danone taking over the target of another large French company, the media group Vivendi, and its powerful controlling shareholder, billionaire Vincent Bolloré.
The London boutique fund, which manages just 70 million euros in assets, sent two letters to Vivendi in May asking for details of its plan to come to divest its largest asset, Universal Music Group, by distributing 60 percent of its share capital to shareholders.
Vivendi has billed the separation of UMG, which will be submitted to a vote of confidence on June 22, as a way to unlock the value given the growing ratings enjoyed by music companies led by the ascent of streaming services.
The French group, which owns 80 percent of UMG, has estimated the company at 33 billion euros. The remaining 20 percent is owned by a consortium led by Chinese group Tencent.
In a letter dated May 21, Bluebell said that while the spin-off was a good idea in principle, the method Vivendi had chosen for the transaction was “suboptimal.” The structure, known as dividends in kind, would lead minority shareholders to be hit by significant tax bills.
To remedy the issue, Bluebell has asked Vivendi to pay the shareholders an extraordinary cash dividend of € 2.80 per share, or about € 3.3 billion.
“We are extremely supportive of separating UMG from the rest of the business. It is the right move and investors have long been pressured to reduce the discount of Vivendi’s holding company,” Marco Taricco, co-founder of Bluebell, said in an interview.
“What we are reserving is the way in which they are conducting the separation by making a dividend in kind. It is not optimal for all shareholders except Vincent Bolloré and Groupe Bolloré.”
Taricco refused to give the dimension of Bluebell’s participation in Vivendi.
Vincent Bolloré effectively controls Vivendi because his holding company owns a 27 percent stake and owns 29.73 percent of the voting rights, which is just below the legal threshold that would require a full acquisition offer.
In UMG’s proposed separation, the billionaire “would not be able” to address tax problems similar to minority shareholders, Taricco said, and will remain UMG’s reference shareholder with a 19% stake in the new entity.
The fund also expressed concern over how Vivendi had already transferred UMG assets to a newly created Dutch company even before securing shareholder approval for the spin-off. “Vivendi’s shareholders were actually presented with done, ”He wrote in the letter.
At this stage, Bluebell has stopped recommending that its shareholders vote against UMG’s proposed separation at the next annual meeting, Taricco said. “We provided a remedy for them to admit that they had not made the transaction in the correct way,” he said, referring to the idea of paying a special dividend.
Vivendi declined to comment on whether the group would be open to such a payment, but defended the transaction structure as “the best option.”
“We will listen to all our shareholders and examine all the different proposals,” Vivendi said.
Universal Music Group, which hosts artists such as Taylor Swift and Lady Gaga, has led most of Vivendi’s growth in recent years.
If the spin-off is completed, Vivendi’s remaining activities will be much smaller and largely focused on France. They include the pay-TV operator Canal Plus; Havas communication agency; Gameloft mobile game publisher; is the publisher of books Editis.
In 2019, UMG made 45% of Vivendi’s 15.9 billion-euro sales and 73% of its 1.5 billion-euro operating profit.