Next week, French conglomerate Vivendi will seek to convince its shareholders of its break-up plan, which has come in for heavy criticism from an activist investor who claims that the plan would only benefit its main shareholder, the Bolloré group.

Shareholders will vote on Monday to split Vivendi into four companies valued at several billion euros.

The group headed by Yannick Bolloré hopes to correct its conglomerate discount, which means that its overall stock market valuation is lower than the sum of its parts.

Broadcasting subsidiary Canal+ would be listed in London and headquartered in France, advertising agency Havas would be listed in Amsterdam, while publishing group Louis Hachette would be listed on Euronext Growth in Paris.

Both companies are scheduled to go public on December 16.

Stripped of some of its assets, Vivendi would become an investment holding company with stakes in Telecom Italia, UMG and Telefonica, among others.

A two-thirds majority is required to approve the demerger at the Extraordinary General Meeting in Paris.

Vivendi shares, which would be excluded from the CAC40 after the demerger, have fallen by 17% since the company's supervisory board announced its break-up plan in October.

Bertrand Lamielle, an analyst at Portzamparc, the asset management subsidiary of BNP Paribas, believes that "the analysts' and investors' narrative is struggling to convince them," and that the plan could be "poorly perceived, or at least not favorable to minority shareholders".

According to JP Morgan estimates, Canal+ should be valued at 6 billion euros, Havas at 2.5 billion euros and Louis Hachette at 2.2 billion euros.

GOVERNANCE ISSUES

Two minority investors, CIAM and Phitrust, urged shareholders to vote against the plan.

Paris-based CIAM, which holds a 0.025% stake in Vivendi, argued that the plan deprives minority shareholders of the protective provisions of French law.

The CIAM group has lodged two appeals with a view to obtaining a takeover bid for Vivendi shares or the cancellation of the project. A request to postpone the shareholders' meeting was rejected by a court on Thursday.

The Bolloré family's holding company is expected to hold 31% of each of the three entities resulting from the demerger.

CIAM and Phitrust claim that the Bolloré group is implementing this demerger plan to circumvent the country's financial regulations.

In France, as soon as an investor owns 30% or more of a company, it triggers a mandatory takeover bid.

But this rule will not apply to foreign-listed entities.

Vivendi rejected these criticisms, claiming that the project had been approved by the voting advisory firms ISS and Glass-Lewis.

In its report, ISS issued a "cautious vote" in favor of the plan, as it "finally addresses a persistent downgrade of the conglomerate", but warns that it could be accompanied by "questionable governance choices" and notes that it offers no real alternative.

Similarly, Glass Lewis highlights "current stock market turbulence" and Vivendi's "less than admirable commitment to progressive governance", but acknowledges that the demerger could "unlock value for investors" compared to today.

(Reported by Gianluca Lo Nostro and Leo Marchandon in Gdansk, Florence Loève in Paris, edited by Augustin Turpin)

by Gianluca Lo Nostro, Leo Marchandon and Florence Loeve