Thursday, May 17, 2012

Vivendi: a value play

Vivendi is a well established French media and telecom conglomerate that we have recently begun eyeing as a solid value play. The firm has a large stake in video game maker Activision, pay-TV unit Canal+ (an HBO-lite of sorts), Maroc Telecom (based in Morocco), and owns French mobile company SFR, as well as Brazilian telecom operator GVT.

Our interest was piqued by Seth Klarman's 2% ownership stake, the almost 8% dividend yield, and the company's dirt-cheap valuation. A catalyst for the unlocking of a big conglomerate discount (estimated at over 40%) is recent chatter (also here and here) of a possible break-up of the company (a rumor that the company has denied thus far), as well as the presence of activist investor Vincent Bollore.

[Disclaimer: We may initiate a position in the common stock in the near future.]

Risks include:
  • Macro and Currency - A French company that derives a large percentage of revenues from Europe
  • History of acquisitions - the firm has a history of spending free cash flows on serial acquisitions
  • Projected earnings slump into 2013

Interview with the CEO, Jean-Bernard Levy (March 1, 2012)

Vitaliy Katsenelson discusses Vivendi (and Xerox, HP)

Link to the latest investor presentation [PDF]

Recent letter to shareholders from March 27 [PDF]

Seth Klarman's Vivendi Investment Is A No Brainer (Josh Zachariah)

Undervalued French Media And Telecom Conglomerate (Mike Arnold)

Well Defined Strategy, History of Significant Dividends Make for a Bargain at Current Price (The Lonely Value Investor)

Milking A French Cash Cow (Stefan Radacovsky)

Seth Klarman “Cigar butt” (Value & Opportunity blog)


  1. Thanks for the suggestion.

    Would you purchase the OTC pink sheets issue (VIVHY.PK)?

  2. Yes, even though the pink sheets issue comes with an extra layer of fees (2-3%), we would be inclined to go with that option. There are at least two other tickers out there that could work as well. Check out the Comments section in the Mike Arnold and Lonely Value Investor articles on Seeking alpha for a broader discussion of this topic.