Murdoch-style split could be a possibility for Vivendi

PA RI S • Three months ago, Vivendi SA’s veteran chief executive Jean-Bernard Levy, under fire for a slumping stock price, said asset sales were “not taboo.”

Now he has quit, the French group could be looking at a more dramatic shake-up than he could have imagined.

Video game maker Activision Blizzard and Maroc Telecom head up the list of candidates for sale, analysts and bankers said, but his successors could now also mull a Murdoch-style split of the business into a telecom and media arm.

“Look at what Murdoch announced, look at all the precedents of a well executed split, and it always releases the conglomerate discount and it creates a lot of value for

the shareholders,” said one source close to the matter, adding while Mr. Levy had been opposed to such a move, Chairman Jean-Rene Fourtou was “much more pragmatic.”

Vivendi, whose debt burden soared last year to 12-billion euros (US$15 billion), has seen its stock price slump 13 percent this year on growing concern about competition faced by its long-time cash cow, French telecoms operator SFR.

The company, which also controls assets including Universal Music Group and Brazilian telecoms operator GVT, provided few clues as to the strategic differences that divided Mr. Levy, who is quitting after nearly a decade, and the company’s board.

“I have the impression that all options are open with the exception of a full split of the group, which seems less likely,” said one Paris-based banker. “But certainly asset sales are likely.”

While speculation swirled around Activision, in which the company owns a 60 percent stake, a split of the group i nto media and telecom assets, echoing News Corp’s similar move announced earlier this week, also looked likely.

“It is quite likely to happen,” the source said. “My feeling is that once the dust has settled, in five or 10 days, they will start inviting bankers to talk to them.”

The source said Activision was “perhaps the asset that is going to go first,” adding the company could raise money by selling blocks of the Nasdaq-listed company on the market. Mr. Levy had seen such moves as a sign of weakness, but a new management team might be more willing to break with precedent, he said.

An outright sale would be more complicated, given a lack of apparent buyers for Activision, said Wedbush analyst Michal Pachter, adding an alternative would be for Vivendi to use Activision to borrow heavily than pay a major dividend out to shareholders and spin the company off.