Incoming bids for Canal Plus?

While the market digests what might happen next in the bidding war now taking place over Sky’s European assets, one savvy observer says perhaps it is time to look at Canal Plus, which is suggested to be “undervalued”.

Laurie Davison, media analyst at investment bank Deutsche Bank, says that the various bids for Sky prove that despite some investors having long been sceptical over the value of incumbent pay-TV providers and traditional pay-TV operators facing huge challenges from telcos and SVoD, Netflix & Amazon, that view could be changing.

“The market is overlooking the leading position and improving subscriber trends of Vivendi’s Canal+. We also see Vivendi’s controlling shareholder and Chairman, Vincent Bollore, as a likely seller should a bid materialise given his record of trading assets and limited synergies with the other key Vivendi assets (UMG, Havas).”

Davison argues that Canal+ is weaker in platform innovation, but is stronger in originated content. “Particular emphasis was placed on Sky’s local language content by Comcast management in the rationale for their bid. TDC also highlighted MTG Studios in their bid for MTG Nordics in January. Canal Plus is the only asset in Europe which combines scale in subscribers (5 million in France and 11 million including African, Polish & other overseas territories) with significant in-house content production.”

Davison admits that Canal Plus’s technical base is weaker, but it is stronger in content ownership. “StudioCanal is the largest producer and distributor of European video content – films plus TV series; and owns one of the largest programming archives & a 51% stake in BanijayZodiak. It stands out as the only European content producer to have signed local language deals with US distributors. In November last year, it signed a multi-series licensing deal with Hulu for European drama SVOD rights. It has also had success with English language productions: Versailles (produced by Banijay France and sold to the BBC & Ovation US), and Safe (produced by StudioCanal’s Red Productions and sold to Netflix). In 2017, it generated €467 million of external sales. Sky, by contrast generated [only a fraction of that sum].”

The bank’s note to investors says that on the above basis, and with the enthusiasm shown for Sky, applying what is now seen as a fair value for Sky could easily add another €3.50 to Vivendi’s share price.

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