(News Bulletin 247) – The communication, media and video game group will leave the Parisian index on June 19. A logical exit given the reduction in the company’s free float capitalization.

Vivendi had not left the CAC 40 since the entry into force of the index, in 1988, the company then being called Compagnie Générale des Eaux.

This will soon be done, on June 19, at the opening of the market, since Vivendi will give way to Edenred.

“This strictly technical and mechanical decision in no way reflects the performance and good fundamentals of the group”, reacted to News Bulletin 247 a spokesperson for the company present in the media, communication and video games.

After this announcement, Vivendi fell 2.2% this Friday on the Paris Bourse around 2 p.m. to 8.15 euros, posting the second largest drop in the CAC 40.

“Technical aspects come into play since index fund managers, who must replicate the performance of the CAC 40, adjust their portfolio, which weighs mechanically”, underlines a Parisian analyst. This is particularly the case for ETF funds replicating the CAC 40, which must sell their Vivendi shares and buy Edenred securities. The eviction of Vivendi from the Parisian stock market elite is indeed not very surprising.

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Split from UMG

Recall that the company had operated in the fall of 2021 the distribution-listing of its most important asset, the record company Universal Music Group (UMG), which thus entered the Amsterdam Stock Exchange. This transaction had the effect of dividing Vivendi’s capitalization by three. At 8.75 billion euros, this is now the lowest of the CAC 40, with the exception of Unibail-Rodamco-Westfield (6.6 billion euros). For its part UMG, of which Vivendi still has 10%, weighs 35 billion euros.

In addition, Vivendi is penalized by the fact that the Bolloré Group owns just under 30% of its capital, which reduces its free float. However, the scientific council of Euronext is based on two technical criteria to make its decisions on integration and exit from the CAC 40, the volume of exchanges on the action and the floating market capitalization.

Admittedly, sectoral logics can be taken into account in the board’s judgment. But where Unibail-Rodamco-Westfield is the one and only representative of its sector, real estate, Vivendi is not really the only media-communication group, since Publicis is also associated with this universe.

“The exit from the CAC 40 also occurs at a time when the price is very low,” continues the Parisian analyst quoted above. Vivendi shares have fallen by 8.5% since January 1, the third largest drop in the CAC 40, and above all by 17% over one month.

Bolloré slows down with four irons

A key catalyst on which several analysts were betting recently took the lead in the wing. Vivendi currently owns treasury shares, and must cancel tens of millions of them this year. The consequence is that in September, the participation of the Bolloré group should theoretically exceed the threshold of 30%, from which a shareholder has the obligation to file a takeover bid (OPA).

Several research departments thus considered it possible that the Bolloré Group, with its well-filled pockets (12 billion euros of potential liquidity at the end of December and this excluding proceeds from the sale of Bolloré Logistics) would then take the plunge and launch this takeover bid.

But recent sales of Vivendi shares, although low in amount, from a subsidiary of the Bolloré Group have undermined this scenario. On the contrary, these share sales support the idea that the Bolloré Group should sell shares on the market to avoid crossing this 30% threshold.

“We don’t really want to cross the takeover threshold. The project is not on the agenda,” said Cyrille Bolloré, the company’s CEO, two weeks ago, quoted by AFP, during the general meeting of shareholders.

To avoid this, Bolloré Group will certainly have to sell more shares. According to Deutsche Bank, after the securities sales announced two weeks ago, the company still holds 29.5% of the capital. With the cancellations of securities planned by Vivendi, this participation would theoretically (and without any new Bolloré Group action) rise to 30.6% in September, according to the bank’s calculations.

All this probably largely explains the recent decline in the group’s stock.

Still, today the valuation of Vivendi is extremely low in relation to its assets. The Parisian analyst questioned calculates a theoretical valuation around around 13.5 euros per share, ie a discount of around 40%.