TF1 Flurry Rattles Bouygues

The foundations of construction giant Bouygues’ media castle may not be as solid as they have previously appeared.

A flurry of trading on the Paris Stock Exchange last week had private web TFl’s shares doing a yo-yo act. Main shareholder Bouygues could only look on, forbidden by law to increase its current 25% slice.

Experts point out that while TF1 dominates French television, capturing over 42% of the audience share and 50% of ad revenue, estimated profits for 1990 remain relatively modest at around 270 million francs ($54 million). They say that if competition for audience and advertising increases from La Cinq, and the overall ad market softens, TF1 could see tougher times.

Brokers’ opinion was divided last week over the cause of the sudden and unusually large movement of 21,000 shares in less than half a day. What was clear was that two stockbroking houses, Didier Philippe and Hauyaux du Tilly started the buying. Neither broker would divulge whom they had been acting for, but both discounted rumours of an attempt to break Bouygues’ strangehold.

According to Regis Lefort, communications analyst at Didier Philippe, the sudden interest in the network looked more like short-term speculation than a concerted effort to take control of TF1.

Uncertainty over France’s most successful national web has largely been fueled by confirmation from British media magnate Robert Maxwell that he is selling his 12% stake in the network.

Gallic insurance company GMF also has been trying to unload a 6% share in TF1 since June but has moved only .16%. GMF is reported to be asking 330 francs ($66) per share.

Not for the first time, Jerome Seydoux’ Chargeurs SA group has been mentioned as a possible buyer. Seydoux, who quit private web La Cinq last year, has limited his tv activities primarily to BSkyB. But, according to an industry observer, “we all know he wants to get further into broadcasting, and he has the money.”

Seydoux, or any other outside buyer for that matter, will have to wait awhile before Maxwell’s stake becomes available.

Under French law, “hardcore” shareholders – those involved in the ’87 acquisition of the privatized TF1 – have three months to decide whether to buy Maxwell’s stake. Holders can only buy a percentage equivalent to what they already own.

JP Morgan broker Genevieve Werner said, “It is not certain that TF1 will maintain the current level of profits.” Per Werner, the current share price for Maxwell’s 12% makes it a less than interesting buy.

On the other hand, Werner suggests investors may well appear if around 25% of the net’s shares became available. That would be the Bouygues Group’s worst nightmare. The group only has 25% of TF1, but chairman Francis Bouygues and his appointees maintain complete control. If other hardcore members decide to call it a day or some of the 36.8% stake that is publicly available on the stock exchange changes hands, Bouygues could face a new investor capable of amassing 25% who might be unwilling to take a back seat.

The Bouygues team has long been campaigning to raise the legal limit for a shareholder to 33%. Such a move would require new legislation, and a Bouygues insider admitted that’s unlikely in the near future.

TF1 also faces the prospect of an increasing number of its shares finding their way into Italian hands. To date, Silvio Berlusconi’s Fininvest has 4.1% and the Italian publishing house Rizzoli bought 2% in November.

Managing director of Rizzoli’s audiovisual companies Luca Cordero di Montezemolo mentioned plans to acquire small stakes in various networks in Europe. Di Montezemolo added that Rizzoli, which recently doubled its TF1 stake from 2% to 4%, would like to up its TF1 share to 5%.

Jennifer Clark in Rome contributed to this report.

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