Vivendi reaches deal with rebel shareholder

Vivendi has reached an agreement with a minority shareholder to increase dividend payments over the next two years, averting a showdown at this month's annual general meeting.

The Paris-based content and media group said that it had made peace with P. Schoenfeld Asset Management (PSAM), a US hedge fund, which had demanded additional payouts.

As part of the agreement, Vivendi will return an additional €2 per share to shareholders - to be split into two payments made at the end of this year and the beginning of 2016 - on top of the €1 per share over the next three years that it had already announced.

The additional cash will mean returning €6.75bn to shareholders, more than the €5.7bn it had initially signalled, which included a share buyback scheme - but considerably less than the €9bn payout PSAM had demanded.

Vivendi said that the New York-based fund had in return opted to drop its demands at the forthcoming annual general meeting on April 17.

It also said that PSAM would vote against another minority shareholder who wants Vivendi to exempt itself from a new French law that would give longer-term shareholders such as chairman Vincent Bollore twice as many votes as new investors.

Mr Bollore has recently tightened his grip on Vivendi, bringing his stake to just over 12 per cent compared with just 5 per cent about a month ago.

Arnaud de Puyfontaine, Vivendi's chief executive, said in a statement on Wednesday that the increased payouts demonstrated "our willingness to reach consensus with some of our minority shareholders, even if it may result in reduced flexibility for Vivendi".

The agreement would appear to head off the biggest challenge to leadership that Mr Bollore has faced since becoming Vivendi chairman last summer.

Last month, PSAM slammed Vivendi, arguing that its €9bn proposed payout was the best way to reward investors now that Vivendi found itself sitting on a mountain of cash following asset sales during the past two years of more than €35bn.

"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," it said.

Following the sales, Vivendi is now built around Universal Music Group (UMG), the world's largest recorded music company, and Canal Plus, the pay-TV business.

The change of heart comes after Vivendi this week said that it had entered exclusive talks with Orange SA to buy 80 per cent of the French telecom operator's Dailymotion video­sharing website for €217m.

A deal, which would value the video website at €265m, would provide investors such as PSAM with the first clues as to Vivendi's vision as it starts a new life as a pure content and media player.

Mr Bollore said that acquiring Dailymotion would "provide the group with added reach in the diffusion of high­-quality musical and audiovisual content across the world". He added: "This is a first step in our ambition to create a large, global group that is focused on media and content."

In an interview with the FT this week, Mr de Puyfontaine said the deal would be the first of many. "We are on a journey to become a fully dedicated player in media and content," he said. "We are thinking about transformational transactions."

Reports have suggested that one of the potential targets could be Sky, the pay-TV operator in which Rupert Murdoch's 21st Century Fox owns a 39 per cent stake, but Mr de Puyfontaine says Vivendi has no interest.

He also rules out ITV, the British free-to-air broadcaster, saying, "ITV is a great company," but it is "too expensive".

He said that the group would look at acquisition targets "with intrinsic value" that can be unlocked by Vivendi's other businesses. "We will not do deals just because we can do them," he insists. "We will do deals that are fit for purpose and which will create value for our shareholders."

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