Investors set to vote on Vivendi's breakup gamble

By Gianluca Lo Nostro, Leo Marchandon and Florence Loeve

(Reuters) - Vivendi will seek shareholder approval on Monday for a proposed break-up of the French media conglomerate, facing opposition from an activist investor who says the deal only benefits its top shareholder, the Bollore group.

The group led by Yannick Bollore is backing a proposal to split Vivendi into four multi-billion-euro companies as its overall market value is currently less than the sum of its parts.

Vivendi's broadcasting arm Canal+ would be listed in London and headquartered in France, advertising agency Havas would float in Amsterdam, while Louis Hachette Group, with its publishing assets, would trade on Euronext Growth in Paris. All the shares would start trading on Dec. 16.

Vivendi itself would be left as an investment holding company with stakes in Telecom Italia, Universal Music Group (UMG) and Telefonica, among others. Its shares, which have fallen 17% since its supervisory board moved forward with the break-up proposal in October, would be excluded from France's blue-chip CAC40 index.

A two-thirds majority is required to approve the split at an extraordinary general meeting in Paris.

"The narrative is struggling to convince the analyst and investor community," said Bertrand Lamielle, an analyst at BNP Paribas's asset management subsidiary Portzamparc, adding that the plan could be "poorly perceived, or at least not favorable to minority shareholders".

Canal+ is estimated to be worth 6 billion euros ($6.3 billion), Havas 2.5 billion euros and Louis Hachette 2.2 billion euros, according to JP Morgan.

GOVERNANCE ISSUES

Two minority investors, Paris-based activist fund CIAM - which holds a 0.025% stake in Vivendi - and Phitrust - which said it owns a "small" stake - have urged shareholders to vote against the plan, saying the split would deprive minority shareholders of the protective provisions of French stock market laws.

CIAM has filed two proceedings calling for a tender offer for Vivendi's shares or for the breakup plan to be annulled. An injunction it filed to postpone the extraordinary general meeting was rejected by a court on Thursday.

Bollore's holding company is set to own 31% of each of the three spin-offs, exceeding the 30% threshold that would trigger a mandatory takeover offer in France and Britain. However, this will not apply to the newly listed entities.

Vivendi and Yannick Bollore have rejected suggestions that the breakup would bypass regulations and deprive minority shareholders of protections, with Vivendi saying the split has been endorsed by proxy advisory firms ISS and Glass Lewis.

Glass Lewis said the split may "unlock value for investors" while ISS has recommended a "cautionary vote" for the proposal in the "absence of superior alternatives", noting the potential for the Bollore group to increase its dominance over the newly listed companies.

($1 = 0.9527 euros)

(Reporting by Gianluca Lo Nostro and Leo Marchandon in Gdansk, Florence Loève in Paris; Editing by Milla Nissi, Kirsten Donovan)