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Negotiations spark questions about future of Universal Music Group at Vivendi

PARIS – Paris-based Vivendi, owner of the Universal Music Group and European pay TV giant, the Canal Plus Group, confirmed Monday that it had received an approach from Altice, the 40% owner of Gallic cable operator Numericable, for Altice to buy Vivendi-owned telco SFR.

To date, Vivendi has not received any formal offer, a Monday press release stated.

Vivendi’s clarification about talks with Altice follows a report in French financial daily Les Echos that Vivendi and Altice had reached an “in-principle agreement” for Vivendi to sell a majority stake in SFR, France’s second-biggest telco, to Altice and that SFR CEO Jean-Yves Chartier had on Friday been given the green-light by Vivendi supervisory’s board to drive a deal through.

The operation, which would see Vivendi retaining 32% of the merged Numericable-SFR, values SFR at over €15 billion ($20.55 billion), Les Echos claimed.

SFR’s sale was always on the cards after Vivendi’s supervisory board, in a push to becoming a pure-play media group, backed a plan, confirmed Nov. 26, to demerge SFR.

The deal still has to be done. Though Les Echos talks up €6 billion ($8.2 billion) in synergies, some from SFR using Numericable’s cable network, an accord would be deficit financed via Altice’s taking on €8 billion ($11.0 billion) in debt.

“The risk would be to load the merged company with too much debt. But there is a rationale since Numericable covers about a third of France and with SFR could use its network, not having to pay Orange for phone calls,” said Francois Godard, at Enders Analysis.

But talks are already sparking questions about the direction Vivendi will take under Vincent Bollore, who became a top shareholder in Vivendi when he sold Canal Plus Group 60% his two DTT stations, Direct 8 and Direct Star, in an equity deal made back in 2011.

Bollore is due to replace Jean-Rene Foutou as Vivendi chairman. Having sold vidgame publisher Activision Blizzard and Maroc Telecom, SFR’s sale would leave Vivendi with only Universal Music Group, Canal Plus Group and Brazilian telco GVT.

“UMG and Canal Plus have no synergies. It doesn’t make sense for Vivendi to keep both. But we don’t know what Bollore’s endgame is. One possibility is that Vivendi will end up with just Canal Plus, a very good trans-media company,” Godard said.

“Big French entrepreneurs have historically liked owning French media companies,” he added.

The question of Bollore’s endgame looks set to hang over Tuesday’s conference call with analysts after the French holding announces its full-year 2013 results.

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