(Bloomberg) -- A tepid first day trading of Canal+, the French pay-TV business split off from Vivendi SE, demonstrated the challenge that billionaire Vincent Bolloré faced in convincing shareholders that a split would boost value.
Canal+ is the largest of three companies being spun out of the parent business, with its shares sliding throughout the trading day to close at £2.26 in London. The combined market value of Vivendi and the three separated companies stood at about €8.84 billion at the market’s close on Monday, which marked a 3.4% premium to the media firm’s closing level on Friday.
The value unlocked by Vivendi’s spinoffs “is less than we anticipated,” likely due to investors’ concerns over corporate governance, Deutsche Bank analysts said in a note on Monday, downgrading their recommendation on Vivendi to hold from buy.
London-listed Canal+’s closing price implies a market value of £2.33 billion ($2.96 billion), according to calculations by Bloomberg. Advertising company Havas shares fluctuated after opening in Amsterdam on Monday before closing at €1.82, while publisher Louis Hachette Group rose from its opening price to finish the day at €1.42 on the Euronext Growth in Paris.
Meanwhile, the remaining company of Vivendi’s shares rallied into the close on Monday, finishing at €2.61. The extended gains came after a Bloomberg News report that CVC Capital Partners Plc is weighing a purchase of the firm’s stake in Telecom Italia SpA.
The listings mark the first stage of Bolloré’s plan to reduce a conglomerate discount he says has been undervaluing assets in his media empire since the most valuable, Universal Music Group, was listed in 2021.
Canal+ had said that listing in London would better reflect its international ambitions. It started as a pay-TV channel in France 40 years ago, with an emphasis on cinema and sports. While the country still makes up about 60% of the company’s revenue, Canal+ has been expanding in other markets. It invested in Swedish player Viaplay Group AB and Hong Kong-based streamer Viu and proposed to buy South Africa’s MultiChoice Group Ltd., the continent’s biggest pay-TV company.
The Canal+ listing was seen as a boost for the London Stock Exchange, which has battled years of depressed initial public offering activity. The likes of Ashtead Group Plc and Flutter Entertainment Plc have sought to move their primary listings from London to New York, where there is a deeper pool of investors.
Yannick Bolloré, Vincent’s son and the new chairman of Canal+, said last Monday at Vivendi’s investor meeting that listing day would “only be the start”, and that the company’s performance should be assessed over the next 12 to 18 months.
Analyst forecasts on Canal+’s valuation vary. UBS analysts in November saw the asset worth €3 billion. JPMorgan, however, expected the valuation to reach €6 billion over time, saying concerns over near-term cash flows were misplaced. Prior to the breakup, Vivendi had an equity value of about €8.6 billion.
Shares of Vivendi’s spinoffs may come under pressure in the first few days of trading, due to the selling from index-tracking funds. JPMorgan estimates such investors may sell about 60 million shares in both Canal+ and Havas. Like other shareholders, index funds would receive stock in the new firms after the split, but may have to sell if the spinoff company isn’t included in the gauge they track.
The breakup plan has faced challenges. Vivendi’s share price had been declining for months ahead of the split, with two activist investors questioning whether the plan would succeed in slashing the conglomerate discount. Governance had been flagged as a worry among investors, as a London listing of French-domiciled Canal+ allows Bolloré to increase ownership in the asset without buying it out at a premium.
Vivendi chairman Yannick Bolloré rebuffed such concern in November, saying all shareholders will have the same rights. The three spinoffs were approved by almost 98% of shareholders last week, after the project won backing from key proxy-advisory firms.
--With assistance from Neil Campling and Pablo Mayo Cerqueiro.
(Updates throughout with additional details and context, starting in first paragraph.)
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