Hedge Fund Boss Steps Up Fight for Big Vivendi Payout to Shareholders -- 2nd Update

By Ruth Bender 

PARIS--A tussle between a defiant Vivendi SA and one of its shareholders gathered pace on Tuesday, as a prominent U.S. hedge fund tried to rally support from other shareholders in its quest to obtain higher dividends.

P. Schoenfeld Asset Management came to Paris with one main message: Vivendi should share its war chest with shareholders. "The amount of money in Vivendi's coffers is irrational," the fund's chief executive Peter Schoenfeld said in a meeting with journalists. "There is one clear issue: the dividend is inadequate."

Vivendi fired back, signaling that the battle the fund is preparing to fight could be a tough one. The French company said it recommends shareholders vote against fund's proposed resolutions for the French media company's annual meeting on April 17.

The Schoenfeld fund wants Vivendi to return 9 billion euros ($10 billion) to shareholders through a special dividend, over EUR3 billion more than the company has pledged to return to holders.

"This U.S. hedge fund wants to dismantle Vivendi and take the cash," said a Vivendi spokesman. "We won't let it happen." In a statement, Vivendi said such an amount of distribution would "significantly reduce Vivendi's financial flexibility and jeopardize its development strategy."

The move from the fund, which owns around 0.8% of Vivendi according to Mr. Schoenfeld, comes as Vivendi has amassed billions in cash as it slimmed down from a telecom-to-entertainment conglomerate to a much smaller media-centric version.

Vivendi has sold off assets that accounted for more than half of its revenue, including video games maker Activision Blizzard and telecommunications companies in France and Morocco. But the group has provided little indication of what it plans to do with its cash and how it plans to develop the company in the future, except that it wants to build a global media and content group. The silence has frustrated some shareholders.

P. Schoenfeld Asset Management is the first shareholder to challenge Vivendi since French billionaire investor Vincent Bolloré, who owns 8.2% of the company, became chairman last June.

The fund argues Vivendi is undervalued because of its large stockpile of cash and uncertainty over how the group plans to use its funds in the future. Mr. Schoenfeld said he would try to convince as many shareholders as possible to support his case before the vote in April. The fund also said selling off all or parts of Universal Music Group, one Vivendi's two remaining businesses, could create value.

With less than a month before Vivendi's annual meeting and representing only a small amount of shareholders, analysts see little chance for the Schoenfeld fund succeeding in challenging Vivendi's chairman. "We believe that it is highly unlikely that PSAM's approach is successful, as Bolloré undoubtedly had plans to reinvest the EUR14 billion cash balance to further ambitions in content and in Africa," said Conor O'Shea from Kepler Cheuvreux.

The fund, which in the past made headlines for opposing Deutsche Telekom AG's terms to buy U.S. wireless carrier MetroPCS Communications Inc., said it has sent three letters to Vivendi since 2013 with suggestions on how to improve the value of the company but hasn't received any response or met with management.

"Shareholders deserve more information. If we leave them with all this leeway, they will never seek any sort of approval for any future plans with shareholders," Mr. Schoenfeld said. He said the company's big pile of cash could tempt management to spend it unwisely.

Several other Vivendi shareholders, including Société Générale unit Lyxor Asset Management, Amundi Asset Management and Natixis Asset Management, declined to comment on the Schoenfeld fund's resolutions.

Vivendi on Tuesday also faced rumblings from another group of minority holders, on a separate request. French fund PhiTrust filed a third resolution asking that Vivendi not apply a new government law that gives double voting rights to investors that have held shares for at least two years, a move designed to encourage long-term investments.

Denis Branche, partner at Phitrust, said the he made the request on behalf of a group of nine shareholders representing slightly less than 2% of Vivendi's capital. Vivendi recommended against the resolution.

Write to Ruth Bender at [e-mail]

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