Telefonica Acquires Vivendi for $9.3 billion Which Plans To Return $6.4 Billion To Its Shareholders Through Assets

The French conglomerate accepts $4.37 billion bid from Altice SA for its residual 20% stakes in Numbericable SFR Vivendi Will Return $6.4 Billion To Shareholders Through Assets Sale

 

The French conglomerate, Vivendi SA (VIVHY), is shifting its focus completely on media sector by selling telecom assets, as the company aims to provide a return of €5.7 billion ($6.4 billion) to its shareholders.

Since mid-2013, Vivendi has adopted a strategy to depart from the telecom industry and sold three out of its six businesses, as the company desires to sell its telecom assets and reward its shareholders.

It accepted to sell Global Village Telecom, its telecom company in Brazil, to Telefonica SA (ADR) (TEF) for €7.2 billion ($9.3 billion) in cash and stocks.

Telefonica SA (ADR) is looking for expansion in its remaining media assets that include Universal Music Group (UMG), the largest music company in the world. Canal Plus, which primarily provides pay-TV service in France, is also expanding overseas, which will increase the revenues slightly in FY15.

The Paris-based media giant reported Friday, after the market closed, that it will provide return to the investors in form of extraordinary dividend share and stock buyback by second quarter of 2017 (1QFY17).

The company expects net earnings to rise 10% compared to FY14, as the restructuring cost would be lower and revenues will be boosted by strong international growth in pay-TV and music stream.

It also said that its directors have accepted a €3.9 billion ($4.37 billion) bid from Altice SA (ATCEY) Founder Patrick Drahi for its residual 20% ownership in Numericable SFR SA, the second-largest French telecom company by subscribers.

The sale price of the stock is €40 per share, which is at a discount of 27.8% to €55.4, closing price of SFR on Friday. The media giant said that it was a practical decision to accept the bid because liquidity issues prevail when a company tries to sell large amount of stocks on the open market.

Returns To Shareholders

The sale of telecom assets has driven Vivendi to increase the amount of shareholders' return to €5.7 billion by FY17. It promised to pay annual dividend per share of €1 for FY14 and plans to maintain similar payout for FY15 and FY16.

Vivandi also propose to buyback €2.7 billion stock, which is €20 per share.

2014 Performance

Vivendi posted its FY14 financial results on Friday in which the company’s net earnings were €626 million and annual revenues were €10.01. The media giant missed the Wall Street’s forecast of €679 million earnings and revenue of €10.21.

Revenues at UMG plunged 5.6% year-on-year (YoY) to €4.56 billion, as high revenue growth of steam couldn’t offset weak CD sales.

Canal Plus revenues mounted 2.7% YoY to €5.46 billion, as its Studiocanal production outperformed on hit movies like “The Imitation Game” and “Paddington”.