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Vivendi Posts EU12.3 Bln 1st-Half Loss on Writedowns
By Daniel Tilles
Paris, Aug. 14 (Bloomberg) -- Vivendi Universal SA posted a 12.3 billion-euro ($12.2 billion) first-half loss and will sell at least 10 billion euros in assets as Chief Executive Officer Jean- Rene Fourtou begins to reverse his predecessor's expansion.
The world's No. 2 media company wrote down 11 billion euros in goodwill on assets such as its Canal Plus pay-TV unit and its music division. Vivendi plans to shed U.S. publisher Houghton Mifflin Co., which it bought for $2.2 billion last year.
Fourtou, brought in when the board fired Jean-Marie Messier last month, has pledged to slash Vivendi's 19 billion euros of debt. Messier spent $77 billion on takeovers, including Universal Studios, to turn the 149-year-old utility into a rival of AOL Time Warner Inc. That strategy led to the biggest loss in French history last year. The stock dropped as much as 12 percent today.
``None of this news is good news to me,'' said Fabrice Vennin, a fund manager at Financiere Meeschaert who owns Vivendi shares. ``Why would they be selling these assets like Houghton Mifflin unless the cash situation is really dire?''
The company's credit rating was cut to below investment grade by Standard & Poor's today, about six weeks after Moody's Investors Service lowered the company to junk. S&P reduced its long-term corporate rating two steps to BB, and left Vivendi on watch for further downgrades, citing concern over the company's financing.
`Easy to Sell'
Vivendi owns the world's top music company, the Hollywood studio that produced ``The Fast and the Furious,'' Europe's largest pay-TV company, publishing and Internet businesses and stakes in the world's biggest water utility and France's No. 2 phone company.
Putting Houghton Mifflin on the block ``is a good idea because it's easy to sell, will fetch a decent price and won't undermine the media strategy for the rest of the group,'' said Mehra Meh, an analyst at Williams de Broe with a ``hold'' rating on Vivendi.
Fourtou, on a conference call, said he sees ``numerous potential buyers'' for the Boston-based textbook publisher, without naming any companies.
Fourtou has already said he plans to sell unprofitable pay-TV businesses in Poland and the Netherlands, a maker of software for set-top boxes and the soccer club Paris Saint-Germain. He also plans to sell more shares in the company's French pay-TV division after combining it with a satellite-TV unit and two European film and TV producers.
``They had to turbo-boost asset sales to get some cash,'' said Jacques-Antoine Bretteil, who helps manage $700 million, including Vivendi shares, at International Capital Gestion.
Establishment's Backing
Messier lost the support of investors and Vivendi's board, which included peers and long-time friends, as the company's shares plunged and Moody cut the company's credit rating to junk.
The board chose Fourtou, who was backed by Claude Bebear, the chairman of Axa SA and one of France's most influential businessmen. Now a Vivendi director, Bebear was one of the first people to publicly call for Messier's departure in May.
The backing of France's business establishment won't necessarily make it easier to sell assets as markets slide, investors said.
``It's all well and good to say you're going to sell 5 or 10 billion euros worth of assets, but it's not obvious how they're going to do that,'' said Mark Pignatelli, who helps manage 100 billion pounds ($154 billion) in securities, including Vivendi shares, at Schroders Plc in London.
Vivendi shares fell as much as 1.85 euros to 14.05 euros, and were trading at 14.07 euros at 3:04 p.m. Paris time. The stock is the worst performer on the Dow Jones Euro Stoxx 50 index this year.
Financing Plans
Vivendi said the board will meet on Sept. 25 to outline a more detailed strategy.
The company has not used any of the 1 billion-euro credit facility Fourtou secured from seven lenders in July, he said.
The company is in talks to set up a 3 billion-euro credit facility -- which would include the first 1 billion euros. Fourtou said he expects an agreement with the same lenders will be signed by the end of August.
``This will allow Vivendi to buy the time necessary to implement the best conditions'' for the sale of businesses, Fourtou said on the conference call. He said the company is trying to avoid a ``fire sale'' of its assets.
Vivendi needs to refinance 5.6 billion euros of debt by the end of the year, the company said.
Chief Financial Officer Jacques Espinasse said Vivendi would consider a rights offer -- a share sale to existing investors -- only as a last resort.
The company's lenders, led by Deutsche Bank AG, Societe Generale and BNP Paribas SA, hastened Messier's removal by refusing new loans until Vivendi presented a plan to repay debt, people familiar with the situation said last month.
By Daniel Tilles
Paris, Aug. 14 (Bloomberg) -- Vivendi Universal SA posted a 12.3 billion-euro ($12.2 billion) first-half loss and will sell at least 10 billion euros in assets as Chief Executive Officer Jean- Rene Fourtou begins to reverse his predecessor's expansion.
The world's No. 2 media company wrote down 11 billion euros in goodwill on assets such as its Canal Plus pay-TV unit and its music division. Vivendi plans to shed U.S. publisher Houghton Mifflin Co., which it bought for $2.2 billion last year.
Fourtou, brought in when the board fired Jean-Marie Messier last month, has pledged to slash Vivendi's 19 billion euros of debt. Messier spent $77 billion on takeovers, including Universal Studios, to turn the 149-year-old utility into a rival of AOL Time Warner Inc. That strategy led to the biggest loss in French history last year. The stock dropped as much as 12 percent today.
``None of this news is good news to me,'' said Fabrice Vennin, a fund manager at Financiere Meeschaert who owns Vivendi shares. ``Why would they be selling these assets like Houghton Mifflin unless the cash situation is really dire?''
The company's credit rating was cut to below investment grade by Standard & Poor's today, about six weeks after Moody's Investors Service lowered the company to junk. S&P reduced its long-term corporate rating two steps to BB, and left Vivendi on watch for further downgrades, citing concern over the company's financing.
`Easy to Sell'
Vivendi owns the world's top music company, the Hollywood studio that produced ``The Fast and the Furious,'' Europe's largest pay-TV company, publishing and Internet businesses and stakes in the world's biggest water utility and France's No. 2 phone company.
Putting Houghton Mifflin on the block ``is a good idea because it's easy to sell, will fetch a decent price and won't undermine the media strategy for the rest of the group,'' said Mehra Meh, an analyst at Williams de Broe with a ``hold'' rating on Vivendi.
Fourtou, on a conference call, said he sees ``numerous potential buyers'' for the Boston-based textbook publisher, without naming any companies.
Fourtou has already said he plans to sell unprofitable pay-TV businesses in Poland and the Netherlands, a maker of software for set-top boxes and the soccer club Paris Saint-Germain. He also plans to sell more shares in the company's French pay-TV division after combining it with a satellite-TV unit and two European film and TV producers.
``They had to turbo-boost asset sales to get some cash,'' said Jacques-Antoine Bretteil, who helps manage $700 million, including Vivendi shares, at International Capital Gestion.
Establishment's Backing
Messier lost the support of investors and Vivendi's board, which included peers and long-time friends, as the company's shares plunged and Moody cut the company's credit rating to junk.
The board chose Fourtou, who was backed by Claude Bebear, the chairman of Axa SA and one of France's most influential businessmen. Now a Vivendi director, Bebear was one of the first people to publicly call for Messier's departure in May.
The backing of France's business establishment won't necessarily make it easier to sell assets as markets slide, investors said.
``It's all well and good to say you're going to sell 5 or 10 billion euros worth of assets, but it's not obvious how they're going to do that,'' said Mark Pignatelli, who helps manage 100 billion pounds ($154 billion) in securities, including Vivendi shares, at Schroders Plc in London.
Vivendi shares fell as much as 1.85 euros to 14.05 euros, and were trading at 14.07 euros at 3:04 p.m. Paris time. The stock is the worst performer on the Dow Jones Euro Stoxx 50 index this year.
Financing Plans
Vivendi said the board will meet on Sept. 25 to outline a more detailed strategy.
The company has not used any of the 1 billion-euro credit facility Fourtou secured from seven lenders in July, he said.
The company is in talks to set up a 3 billion-euro credit facility -- which would include the first 1 billion euros. Fourtou said he expects an agreement with the same lenders will be signed by the end of August.
``This will allow Vivendi to buy the time necessary to implement the best conditions'' for the sale of businesses, Fourtou said on the conference call. He said the company is trying to avoid a ``fire sale'' of its assets.
Vivendi needs to refinance 5.6 billion euros of debt by the end of the year, the company said.
Chief Financial Officer Jacques Espinasse said Vivendi would consider a rights offer -- a share sale to existing investors -- only as a last resort.
The company's lenders, led by Deutsche Bank AG, Societe Generale and BNP Paribas SA, hastened Messier's removal by refusing new loans until Vivendi presented a plan to repay debt, people familiar with the situation said last month.
