Vivendi mulls split as TIM legal challenge looms

The move comes as the French media group is on the verge of filing a legal challenge to TIM's decision to sell its networks business to KKR. The two things are not in any way related, but the fact that both are happening at once demonstrates how many plates the company has spinning at present.

"Since the distribution and listing of Universal Music Group in 2021, Vivendi has endured a significantly high conglomerate discount, substantially reducing its valuation and thereby limiting its ability to carry out external growth transactions for its subsidiaries," Vivendi declared as it presented its plans for the split.

Roughly translated, its component parts are worth more than the sum of the whole, in the eyes of the market, at least.

While Universal Music's share price has fluctuated a fair amount since its listing just over two years ago, the past six months has brought a steady upward trajectory; its shares were close to €26 at the time of writing, up from around €20 in mid-June. Vivendi, on the other hand, has had a fairly depressed share price for the past six months – it dropped almost as low as €8 in August – but saw a big uptick when it published the news of its proposed split and briefly hit €10 on Thursday.

The market clearly likes the plan. Broadly speaking, it will see Vivendi split into three distinct, listed entities, the first of which will be structured around French TV outfit Canal+ and the second around advertising group Havas.

The third will be an investment company housing Vivendi's listed and unlisted financial stakes in the cultural, media and entertainment sectors, including its majority stake in publisher Lagardère. The group did not specifically mention its 23.75% stake in TIM, but it surely would fit into this category.

Its TIM holding has been the source of much angst for Vivendi in recent years, given that the strategy of its management and board is largely at odds with Vivendi's own plans for the Italian telco. Essentially, Vivendi opposes in principle TIM's plans to sell off its network assets, and particularly at the price it has agreed with KKR – €22 billion.

No sooner had TIM and KKR signed on the dotted line than Vivendi shared its intention to take legal action, insisting that due process has not been followed. It seems committed to that idea.

Reuters this week cited a pair of unnamed sources as saying that Vivendi will file its complaint to a Milan court on Friday.

The newswire also reported that TIM chairman Salvatore Rossi has confirmed rumours that he will not seek to serve another term when his mandate expires next year. Whether or not that proves to be good news for Vivendi is anyone's guess, but has clashed with the French firm a number of times, which in its turns has called for him to step down more than once. TIM will apparently make a formal announcement later on Thursday.

Ultimately though, TIM is just one part of Vivendi's business empire, albeit a particularly thorny one. The restructuring announcement is much about its core business lines and its desire to improve their valuations.

It seems likely that this split or something similar will go ahead, although there are of course no guarantees. Vivendi said it is working with its usual banks and advisers to study the feasibility of it. It will provide an update in due course.