September 9, 2013 2:36 pm

Vivendi: activist executives

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Investors should be very wary of minority shareholders turning into managers

First Accor, now Vivendi? Late last month, Europe’s largest hotelier chose Sébastien Bazin as its new chief executive. As European head of private equity firm Colony Capital, with about one-tenth of Accor’s shares, he had pushed for a more aggressive management strategy. Now there are suggestions Vivendi may go down a similar road. Vincent Bolloré – the businessman who emerged as a 5 per cent shareholder in the media-cum-telecoms group last year – is reportedly putting himself forward as the group’s next boss. Mr Bolloré, it seems, did not like headhunters’ first CEO choice, even if chairman Jean-René Fourtou did.

Two cases of activist shareholders turning into managers is not a trend – and Mr Bolloré’s play may not succeed. Still, investors should be very wary. The pace of change at both these companies has been sluggish and their share prices have gone nowhere in the past two years. But handing management reins to a minority shareholder advocating a particular strategy needs to be done with the greatest of care – and with clear assurances all investors’ interests will be protected. Large minority investors are generally entitled to claim board seats – something Colony and Mr Bolloré had both taken up. But control on the sly is not attractive.

That said, whoever takes over at Vivendi has much work to do. The recent Maroc/Activision deals have eased balance sheet pressures but at the price of earnings per share dilution. Sum-of-the-parts valuations suggest there is still hidden worth in the group. But unlocking this either by more disposals or by a demerger of the media and telecoms interests is the challenge. With the shares at €16.75 and using typical sector multiples, the holding company discount may be close to 15 per cent. If Mr Bolloré or anyone else can get rid of that, he/she will truly be acting for everyone’s good.

Email the Lex team in confidence at lex@ft.com

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