(News Bulletin 247) – The British bank went from “online weighting” to “overweight” on the action of the media and communications group, judging the value far too cheap to ignore, with three elements likely to bring the ‘action.
Tough year on the stock market for Vivendi in 2023. The media and communications group has lost 7% since January 1, penalized in particular by share sales by Groupe Bolloré, its reference shareholder with around 29% of the capital.
These sales had broken the speculative nature of Vivendi shares, several analysts having previously mentioned a public takeover offer from Bolloré (due to the crossing of the threshold of 30% of the capital) as a catalyst for the stock.
This disappointing stock market sequence is one of the factors leading to Vivendi’s ouster from the CAC 40 last June.
There remains a valuation considered attractive by certain research offices, including Barclays which on Monday went from “online weighting” to “overweight” on the stock, which amounts to going from neutral to buy on the stock. An increase in recommendation which allowed Vivendi shares to gain 0.7% on Monday and resist the market fall, the SBF 120 having fallen by 0.99% on the same day.
The bank sees a good entry point to position itself on value, with a discount of 45% compared to its enterprise value calculation via the so-called “sum of the parts” methodology, which consists of calculating the value of a company by evaluating each of its activities then applying a holding discount.
Barclays recognizes, however, that a low valuation without an upcoming catalyst is not enough to make a stock attractive. However, the British bank lists three.
>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio
1) A lying poker about Ligue 1 that could be a winner
The first catalyst is linked to football and more precisely to the auctions for the allocation of television rights to Ligue 1, the French football championship, for the period 2024-2029.
Historic broadcaster of French football, Canal Plus, owned by Vivendi, refused to participate in these auctions, its boss Maxime Saada denouncing an opaque call for tenders which would favor Amazon, according to a letter which was revealed by L’Équipe. Criticisms obviously brushed aside by Vincent Labrune, president of the Professional Football League.
According to Barclays, Canal Plus pays 332 million euros per season for its current rights (which include the two best posters of the week) compared to 250 million euros for Amazon.
It is difficult to understand how this issue, which resembles a lying poker game, will evolve.
“This saga is expected to have many twists and turns (we think it is unlikely that Ligue 1 will get one or two bidders who reach both reserve prices on October 16) and although the letter from Canal+ “we do not “offer” could only be a negotiation ploy, we believe that the probability of a reduction in the Ligue 1 rights sold to Canal+ (in terms of the amount paid by the encrypted channel, Editor’s note) is high”, considers Barclays.
The bank has decided to reduce the rights paid by Canal+ by 50 million euros per year, which would increase Vivendi’s valuation by around 300 million euros, or 3% of the current market capitalization, Barclays estimates.
2) The end of the Telecom Italia saga
The second catalyst would occur as part of the Telecom Italia (TIM) saga, a Talian telecoms operator of which Vivendi is the largest shareholder, with 23.75% of the capital.
For more than a year, part of the group’s activity, the fixed network of the Italian telecoms operator (as well as its participation in the submarine cable company Sparkle) has been for sale, via a company called ” Netco. At the same time, another entity must remain, “ServCo”, which would bring together mobile services for businesses and individuals, TIM Brasil and data centers. The KKR fund, now associated with the Italian Treasury, was selected in June by the TIM board of directors for the acquisition of Netco. The two buyers now have until October 15 to submit a binding offer.
Questions surrounding Netco’s valuation remain unanswered. KKR’s proposal currently amounts to around 21 billion euros while Vivendi has repeatedly mentioned wanting a figure of 31 billion euros, debt included.
But for Barclays, this split of Telecom Italia between “NetCo” on the one hand, and “ServCo” on the other, will create value anyway. Including for TIM’s main shareholder, Vivendi.
This is particularly because the market does not attribute a very high value to Vivendi’s stake in TIM, which reflects investors’ skepticism about the success of this operation, judges Barclays.
The bank, for its part, estimates that this operation has a 75% chance of being completed. It calculates that a valuation of 21 billion euros for NetCo (that of KKR’s offer) would imply that the value of Vivendi’s share in TIM (and therefore both “NetCo” and “ServCo”) would increase from 1.18 billion euros currently at a range from 2 billion to 3.71 billion euros. Or 59 cents to 1.83 euros per share, which means a gain of 7% to 22% for the stock, all things being equal.
3) Lagardère better valued
The third catalyst is technical and is linked to the takeover of Lagardère. Vivendi’s public takeover offer for the Lagardère family company is somewhat complex, with a first part (known as the “main offer”) which was completed in June 2022, allowing Vivendi to rise to 57.35 % of capital.
But another component, called a subsidiary offer (as part of the takeover bid), allows Lagardère shareholders to have the right to transfer their shares to Vivendi at a unit price of 24.10 euros until December 15 inclusive. This while Lagardère shares are currently trading at 19.06 euros.
According to Barclays, 31.18 million shares, representing approximately 22% of the capital, were tendered to this subsidiary offer, and given the differential with the current price, the British establishment expects that a vast majority shareholders exercise their right to sell within the framework of this offer. To the extent that Arnaud Lagardère and Qatar (via Qatar Holding) will retain their respective stakes of 11.1% and 11.5%, the remaining float on Lagardère shares will be “tiny”, anticipates the establishment.
As a result, Barclays expects analysts to change their valuation methodology for Lagardère, moving from the market capitalization published by Euronext to a “sum of the parts” calculation.
In its case Barclays uses a multiple of 9 times the Ebitda (gross operating surplus) for the “travel retail” branch (retail in airports and train stations) of Lagardère and 8 times for publishing. Ultimately, on the basis of other additional parameters, the bank arrives at a theoretical “sum of the parts” Lagardère share price of 26.11 euros. Which would theoretically add an additional 39 cents to Vivendi stock, a gain of around 5% from the current share price.
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.