Vivendi Studies Strategy After Two-Way Split Ruled Out is an article from Bloomberg Businessweek about what Vivendi might do now that it has allegedly ruled out breaking the company into two separate entities. The interesting part of this article is that one of the scenarios states that Vivendi is looking at breaking up the entire company which would mean a sum of the parts valuation would be used.
My sum of the parts valuation done on 4-21-2012, written in my article here, came to a per share estimate of intrinsic value of $43.07 per share. Looking back on the post now, I think that is a very conservative estimate.
Also on the Vivendi front, while I was reading Martin Whitman’s Third Avenue fund 3Q shareholder letter, I found that they have bought into Vivendi. Here are their reasoning for buying into Vivendi at this time:
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Also during the quarter, the Fund initiated a position in the shares of Vivendi S.A. (“Vivendi”), a company that has intrigued various members of our team for more than five years. The Fund had avoided investing in Vivendi’s shares for a variety of reasons, not the least of which were the company’s long-running addiction to debt-financed acquisitions and the absence of any discernible strategy for building shareholder value. In retrospect, the discipline paid off. The stock has performed very poorly over a long period of time. Vivendi spent much of its life as a French water utility, but in the mid-1990s was set on a path to become one of the world’s largest media and telecom empires. The improbable but very rapid transformation of Vivendi into a telecom and media giant was driven by a number of audacious debt fueled acquisitions. By the early 2000s, the tech, media and telecom bubble began to burst and the Vivendi empire famously came crashing down under a mountain of debt. The company spent much of the next decade languishing in the absence of strong management and a reasonable strategy. Most recently, though, considerable change is afoot at Vivendi. The company dismissed the CEO of its largest subsidiary, SFR, which is the second largest telecommunications company in France. SFR had been one of the epicenters of Vivendi mismanagement; the telecom company performed particularly poorly in the areas of cost management and in its failure to adequately address and confront the threat of new and increased competition. Shortly after the dismissal of SFR’s CEO, Vivendi’s board dismissed Vivendi’s own CEO, apparently as a result of irreconcilable strategic differences. Vivendi’s Chairman, who, during his own brief stint as CEO of Vivendi in the early 2000s, deleveraged the company considerably, has become the public face of the company and declared a strategic about-face. It appears that none of Vivendi’s underlying operating businesses are sacred any longer. As part of a broad restructuring effort, a number of its businesses have become subject to possible disposal in the effort to reduce Vivendi’s debt load and make headway in closing the gap between the share price and the underlying value of the company’s investee businesses, several of which are crown jewels within their respective industries. As it stands today, the company controls France’s second largest telecommunications company which, when combined with its control of the incumbent telecommunications company in Morocco and a highly successful Brazilian telecommunications company, would comprise a formidable global telecom business were they to be separated into an independent entity, as has been speculated. Vivendi also controls Canal +, France’s largest television business, as well as Universal Music and ActivisionBlizzard, the world’s largest music and video game businesses, respectively. There is considerable scope for dispositions as well as a sensible reconfiguration of the business into various components, all of which seem increasingly likely. Shares of Vivendi are trading at a considerable discount to our conservative estimate of its net asset value, essentially the current liquidation value of the company, and it appears that the mounting pressure on the company’s board has made value enhancing transactions and debt reduction increasingly probable.
Always nice to see a big time value fund buying into the companies you own.
Aswath Damodaran’s: Apple’s Crown Jewel: Valuing the iPhone Franchise is amazing valuation piece which could be used as a template to value other powerful franchises.
Warren Buffett Reflects on why he stayed in Omaha.
How to Gain an Investment Edge with Quotient’s Andre Bertolotti is a 4 minute video clip from The Manual of Ideas on how Bertolotti gains an edge in his investments.
How I got Religion and Dropped My Series 7 is a very interesting 6-minute video interview with the Reformed Broker about what he sees as the failings of holding the series 7 and the problems it can create in investment firms and Wall Street.
The Science and Psychology of Memory is a short write up from Farnam Street on things that you can do to improve your memory.
More links to come until I figure out if either of the two companies I have found to research deserve full article treatment.