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ACTIVISION BLIZZARD, INC.

(ATVI)
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Vivendi kicks off wider revamp with Maroc sale deal

07/23/2013 | 06:43am EDT
A man walks past a sign at the headquarters of telecommunications company Etisalat in Dubai October 25, 2011

PARIS/DUBAI (Reuters) - Vivendi SA's long-flagged deal to sell its controlling stake in Maroc Telecom to Abu Dhabi-based Etisalat is just the first step in the French conglomerate's bet that it can remake itself as a media-focused company.

Vivendi said on Tuesday it had entered into exclusive talks to sell its majority stake in Maroc Telecom to Etisalat for 4.2 billion euros ($5.54 billion) in cash.

The deal, when finalised, would be the first major divestment by Vivendi as part of its year-old strategy to reduce exposure to capital-intensive telecoms to focus more on its media business.

Vivendi's shares were up 3.31 percent at 1030 GMT and Etisalat shares closed up 1.27 percent.

Vivendi had initially hoped to get as much as 5 billion euros for the stake, but the lower price was seen as reasonable given Maroc Telecom's lacklustre performance lately and the fact that talks on the stake sale had dragged on for months.

"Despite the price disappointment (at a discount to the closing price), the deal is good news for the group, allowing it to begin its restructuring and the reduction of its debt ahead of a possible spinoff of SFR," analysts at CM-CIC said in a research note.

The deal also signals a new aggressiveness at Etisalat, which had slowed down its pace of dealmaking after an aggressive shopping spree that saw it spend about $12.6 billion on acquisitions between 2004 and 2009.

ACTIVISION, SFR IN FOCUS

The state-owned Abu Dhabi company's bid for Morocco's Maroc Telecom is its first public approach for a foreign company since a $12 billion bid for a controlling stake in Kuwait's Zain failed two years ago.

Since then, the operator has overhauled management by appointing a new chief executive and new heads of finance and strategy with an apparent focus away from overseas forays that failed to add much to the bottom line.

In many of those cases, Etisalat stumbled by not gaining adequate control - still a potential risk with the Maroc Telecom deal. The companies said parallel talks with a consortium of local investors will play out in the weeks to come.

A Middle East telecoms banker who has previously worked on deals for Etisalat said it was not clear whether the other investors would be brought in to help buy part of a government-held 30 percent stake or share in the stake bought from Vivendi. "Either way, a bigger representation of local investors in Maroc will not be a pleasing scenario for Etisalat."

In results released on Tuesday, Etisalat posted a 6 percent year-on-year profit gain. It had reported declining earnings in nine of the previous 13 quarters, with earnings greatly influenced by foreign assets despite most of its revenue coming from the UAE, where it competes with du.

The Maroc transaction ranks as one of the largest emerging market deals this year. It coincides with an even bigger European telecoms deal, the Dutch telecoms group KPN's 5 billion euro deal to sell its German unit to competitor Telefonica Deutschland.

Vivendi is now widely expected to shift focus to finding ways to pull cash out of its Activision Blizzard U.S. video games unit, which it previously tried, but failed, to sell. Another attempted sale, of Brazilian telecoms unit GVT, was also pulled after offers lagged expectations.

It is also expected to consider a spin off of French telecoms unit SFR, which it could eventually list through an initial public offering.

SFR, which has been struggling with competition from upstart operator Iliad, on Monday said it had entered into talks to share part of its mobile network with Bouygues Telecom.

"These two moves mark the first concrete steps of the restructuring programme - as such, we think they should drive a re-rating as the market sees proof something is actually happening," Liberum analyst Ian Whittaker said in a research note.

The Etisalat offer values Vivendi's 53 percent controlling stake in Maroc Telecom at 92.6 Moroccan dirhams per share, below its closing share price on Monday of 99.55. It traded 5.99 percent lower on Tuesday at 93.58.

The deal assigns an enterprise value to Vivendi's stake of 4.5 billion euros, equivalent to 6.2 times its earnings before interest, taxes, depreciation and amortisation.

Vivendi and Etisalat have been negotiating the deal since late April, when the United Arab Emirates-based company submitted a binding offer that was deemed more attractive than a lower, rival bid from Qatar-backed Ooredoo.

The 4.2 billion price includes 300 million euros in 2012 dividends from Maroc Telecom due to be paid to a holding company Etisalat is acquiring but which will instead be paid to Vivendi.

Vivendi is being advised by Credit Agricole and Lazard on the sale and Etisalat by BNP Paribas and Attijariwafabank.

($1 = 0.7580 euros)

(Additional reporting By Dinesh Nair, Leila Abboud and Sophie Sassard; Editing by Jeremy Laurence and Matt Driskill)

By Christian Plumb and Dinesh Nair


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
ACTIVISION BLIZZARD, INC. 0.35% 79.56 Delayed Quote.-14.31%
BNP PARIBAS -1.14% 53.54 Real-time Quote.24.21%
EMIRATES TELECOMMUNICATIONS GROUP COMPANY PJSC 0.57% 24.9 End-of-day quote.47.34%
GECINA 0.69% 123.9 Real-time Quote.-1.90%
ITISSALAT AL-MAGHRIB (IAM) S.A. 0.25% 141.75 End-of-day quote.-2.24%
KLÉPIERRE 0.97% 19.25 Real-time Quote.4.68%
STMICROELECTRONICS N.V. -2.75% 38.89 Real-time Quote.28.43%
VIVENDI SE -0.44% 31.75 Real-time Quote.20.36%
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Financials (USD)
Sales 2021 8 786 M - -
Net income 2021 2 562 M - -
Net cash 2021 7 480 M - -
P/E ratio 2021 24,5x
Yield 2021 0,60%
Capitalization 61 874 M 61 874 M -
EV / Sales 2021 6,19x
EV / Sales 2022 5,25x
Nbr of Employees 9 500
Free-Float 64,0%
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Number of Analysts 31
Last Close Price 79,56 $
Average target price 113,31 $
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Managers and Directors
Robert A. Kotick Chief Executive Officer & Director
Daniel I. Alegre President & Chief Operating Officer
Armin Zerza Chief Financial Officer
Brian G. Kelly Chairman
Frances Fragos Townsend Secretary & Chief Compliance Officer
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