Advanced Television

Vivendi tops up war chest

June 6, 2019

Vivendi, late on June 4th, wrapped up the issue of a massive €2.1 billion bond in tranches to mature in 3, 6 and 9.5 years.

A report to clients from Deutsche Bank summarises the background behind the move, saying: “The stated rationale was to finance the €1.1 billion M7 acquisition and to refinance an existing €700 million bond maturity expiring at the end of the year.

A few days ago, the bank asked its clients to “ignore” their preconceptions about Vincent Bollore’s M&A track record for a moment. “Consider a pay-TV group acquiring operations in neighbouring markets, with strong synergies across production and commissioning, set-top box procurement, and transmission & CRM. Add in the increased negotiating power with rights holders, particularly Mediapro for upcoming Ligue 1 rights. Sky realised >£200 million per annum of savings from a similar roll-up of SkyItalia, UK and Germany, implying >E110m for Canal+ and M7. This is coming with a single-digit EV/EBITDA multiple of ~9x. That is compelling when similar deals have been in 11-12x range; TDC’s bid for MTG’s payTV Nordics in was at 11.1x and Comcast-Sky at 12.2x.”

The bank’s report continued: “These bids/deals show that there remains the interest in pay-TV assets in Europe, in spite of the well-publicized structural headwinds. Potential acquirers including the spurned bidders for Sky (Disney & Fox), plus telcos and OTT, may well look at C+/M7 after this deal and see a similar opportunity. Put the combined entity on 10x EV/EBITDA and its combined value would be ~E7.5bn vs consensus €3-6 billion (including M7 at ~E1 billion). Every extra €1 billion of value ascribed to the combined group is worth €0.8 billion per Vivendi share or 3 percent to market cap. The buyback, which was started from [May 28] offers backstop support below €25 per share, UMG headlines/sale, activist involvement or Canal+ potential sale could provide further upside.

Separately, Music Business Worldwide reports Universal Music (UMG) is set to announce the signing of a global publishing deal with Rosalia. The signing is significant as the majors have been underweight LatAm and Asian local artists and Rosalia is one of the major Latam acts and has been tipped as a global breakout star having won multiple Latin Grammy awards. Her most recent single reached no.2 on Youtube’s global music chart.

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