Vincent Bollore tightens Vivendi grip with further share purchase

French industrialist Vincent Bollore has increased his stake in Vivendi, tightening his grip on the media and content group on the eve of a showdown with activist shareholders.

The billionaire and one-time corporate raider, who became chairman of Vivendi last summer, said that his Bollore Group had bought an additional 24.6m Vivendi shares for €568m, bringing his stake to just above 12 per cent.

Mr Bollore's third significant share purchase means that he has more than doubled his stake in Vivendi in a matter of weeks, just as he faces an open revolt by some investors over his vision for the Paris-based group.

The move revealed on Thursday came as an influential US research firm advised Vivendi shareholders to vote against two resolutions put forward by a dissident investor, who is calling on the French company to pay out €9bn in dividends this year. P. Schoenfeld Asset Management (PSAM), a US hedge fund that owns less than one per cent of the company's shares, has criticised Vivendi's current capital return plans after a series of asset disposals have seen its cash pile grow.

But ISS, whose recommendations are widely followed by investors, particularly in the US, declined to back PSAM's resolution in a report

ISS said that PSAM's proposals gave "too little credit" to the company's recent performance."The board does appear to have acted opportunistically and yet with discipline in its strategic pivot, divesting assets when valuations are at five-year highs yet declining to make acquisitions at a time when valuations on potential targets are generally not attractive for buyers," it said.

The fight comes after a huge downsizing at Vivendi that has seen it sell telecoms and other assets for more than €35bn, paying off its once-heavy debt and leaving it with an estimated €15bn in cash.

Vivendi recently said it expected to return €3bn to shareholders via three annual dividend payments. The group also said that it could return up to an additional €2.7bn via a share buyback programme - but at a maximum purchase price of €20 a share. On Thursday, Vivendi shares were trading at €23.19.

"PSAM believes that Vivendi is significantly undervalued due to its excessive cash holdings, inadequate capital return policy and the uncertainty over Vivendi's future use of its capital," the hedge fund said in a statement.

PSAM is not the only disgruntled shareholder. PhiTrust, another minority investor, wants Vivendi to exempt itself from a new French law that would give longer term shareholders such as Mr Bollore twice as many votes as new investors. Investors will vote on both the cash and voting rights issues at Vivendi's annual general meeting on April 17. ISS did not weigh in on the voting rights issue.

In the meantime, tension between Vivendi's leadership and the activist shareholders has been rising. Adamant that the group needs the cash to guarantee flexibility for asset purchases in content and media, Vivendi management warned PSAM in a letter that it could fall foul of French law if it tried to form a united front with other shareholders.

The letter, sent last week, says that French law prohibits foreign nationals from outside the EU from owning more than 20 per cent of a company with a television licence, which is considered an asset of national strategic interest. Vivendi owns Canal Plus, the pay-television business.

"In so far as it would appear that your direct or indirect share ownership, together with that of third parties with whom you might join forces, could surpass the 20 per cent threshold, this could be seriously prejudicial to the company," states the letter. "We would be forced to promptly bring legal action against you to seek joint and several damages."

In a written response to Vivendi, PSAM said that it was "very disappointed to have received this letter . . . whose purpose seems to be to intimidate us. We consider this behaviour totally unacceptable".

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