No suitors allowed

Conglom rebuffs reports of investor's offer

Is Vivendi in play? That was the question on investors’ and market watchers’ minds Wednesday as the French media conglom revealed it had rejected an “approach” by Norwegian investor Alexander Vik.

Posting a 41% rise in net income for the first quarter of 2006, company also said its “supervisory board and management board unanimously rejected a dismantling approach” from Vik’s investment company, Sebastian Holdings.

Several wire reports categorized the approach as a breakup bid for the Gallic conglom. According to the reports, Vik is said to have offered about E33.50 ($42.60) a share for Vivendi, which values the company at E38.6 billion ($49.1 billion).

Vivendi adamantly denied Sebastian had made a play for the company, instead describing the move as a working document.

“The working document is not an offer, properly speaking, and the numbers being circulated are totally unsubstantiated,” Vivendi topper Jean-Bernard Levy said Wednesday at a press conference.

“Financing is claimed (in the document), but the letters from the banks show that financing is far from assured,” he said. “This offer, which is backed by no secure financing, is a closed issue for us.”

The company issued a second press release saying it intended to warn the Gallic market regulator of the falsity of the published reports.

“Reports about Vivendi are circulating today, focusing on an alleged offer that was to have been made to the group,” the release said. “These same reports seek to lend credence to the idea that these proposals were drawn up in agreement with the group, or at its request. Such suggestions are false. Given these circumstances, Vivendi has notified the French Markets Authority.”

In April, reports surfaced that Vik had been pushing for a change in strategy at the conglom, advocating a breakup by selling off Vivendi’s content biz or its telecom holdings.

Earlier in the week, rumors circulated that British phone giant Vodafone was preparing a $50 billion bid for Vivendi, a move that analysts have since said is unlikely.

Vivendi’s reported gain in first-quarter net income comes on the back of strong growth in its music and games businesses and exceeded analysts’ expectations.

Vivendi also said it expects adjusted net income to rise 16% to $3.1 billion this year, up from its previous forecast of 11%-13%.

Company said consolidated net income rose to $906 million in the first quarter, up from $638 million a year earlier.

On an adjusted basis, which excludes charges like impairment of goodwill and income from discontinued operations, net income rose 12% to $754 million.

Operating profit rang in at $1.27 billion, from $1.17 billion last year.

Last month, Vivendi said sales rose 5.7% to $6.07 billion in the quarter.

First-quarter operating profit at the company’s French mobile phone unit, SFR, rose 11% to $848.6 million, making it the largest unit by sales and profit contribution.

At Universal Music Group, earnings rose to $114.6 million vs. $48 million a year earlier. Group said the operating profit included a $63.7 million cash deposit it recovered after a successful appeal in a lawsuit brought by TVT Records.

Earnings at its games unit were up 109% to $29 million, riding on the success of hit “World of Warcraft.”

Paybox Canal Plus was the hardest hit, reporting a 68% drop to $42 million in earnings from operations. Vivendi said the plunge stemmed from the jaw-dropping sum Canal Plus forked over for Premier League soccer rights.

“This investment, which impacted mainly first-quarter earnings, will be fully absorbed over the year,” Vivendi said.

Finally, Marco Telecom’s earnings came in at $263.6 million, up 15% from the first quarter last year.

Vivendi shares declined 0.4% to $35.50 in Paris after erasing a gain earlier in the day of as much as 5.9%.

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