Could Banijay-Endemol Shine Deal Be Vivendi’s Ticket to Becoming Global Powerhouse?

Could Banijay-Endemol Shine Merger Be Vivendi's
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In sealing a $2.2 billion deal to buy Endemol Shine, Banijay Group chairman Stephane Courbit realized a long-held dream to own the producer and distributor of such shows as “Big Brother” and “Peaky Blinders.” But will the merger also pave the way for fulfilling the ambitions of another French media magnate, Vivendi’s Vincent Bolloré?

Vivendi became a minority shareholder in Banijay in 2016 with a 26.2% stake and now owns a 32.9% share. The French media conglomerate will therefore be a significant stakeholder in the new Banijay-Endemol Shine entity, which, if the deal is approved by regulators, will be the world’s largest non-U.S. television producer-distributor, with an expected combined revenue of $3.3 billion in 2019.

Bolloré has long nurtured the ambition of turning Vivendi into an international powerhouse able to compete with U.S. studios. Its ultimately unsuccessful attempt to forge an alliance with Italy’s Mediaset underscored that drive. The question is whether the combined Banijay-Endemol Shine group could now provide a vehicle for Bolloré to achieve his goal.

“It’s impossible to know for sure at this point,” said Francois Godard at Enders Analysis. Right now, “it seems that Bolloré sees its participation in Banijay primarily as a good investment, and Stephane Courbit has a tight grip on the new group and has no intention of letting it go to Vivendi,” Godard said, noting that Vivendi remains a minority shareholder in Telecom Italia.

But in a few years, the likelihood of Vivendi upping its stake in Banijay is greater, an industry source said. “It’s difficult to imagine [that] Vincent Bolloré, who is known to be a corporate raider, put in millions into this deal without any agenda,” the source said.

Contacted by Variety, Vivendi had no comment.

Jean-Baptiste Sergeant at Mainfirst Bank in Paris said that Vivendi’s investment in the Endemol Shine acquisition is currently only €250 million ($278 million). That’s a small amount for Vivendi, the parent company of Canal Plus and Universal Music Group, especially as it is currently closing a $3 billion deal for China’s Tencent to buy a 10% stake in UMG.

But “with the French TV banner Canal Plus Group comprising pay and free-to-air channels and its production-distribution arm Studiocanal, which is investing more and more in scripted TV, Vivendi could potentially create some industrial synergies with Banijay-Endemol Shine and become more vertically integrated,” Sergeant said.

An industry source close to Vivendi notes: “In recent years, Vivendi’s strategy has been to position itself as a producer of international content rather than a media group, and that’s why they have acquired a number of production companies across Europe, such as Tandem (‘Crossing Lines’) in Germany, RED (‘Years and Years’) in the U.K. or SAM (‘Borgen’) in Scandinavia, so its alliance with Banijay-Endemol Shine makes perfect sense.”

Under the terms of the merger, which needs approval by France’s antitrust board, the new combined group will be 67.1% owned by LDH, a holding company comprising Courbit’s Financiere LOV, De Agostini and Fimalac. At the moment, listing the new entity on the stock exchange isn’t conceivable, given Banijay and Endemol Shine’s respective debt loads of about $486 million and $1.83 billion as of December 2018.

The new combined group could perhaps go public in three years’ time, Sergeant said. At that point, Bolloré could make a move either to sell or acquire more shares.

“We’ve seen Bolloré do that in the past with Ubisoft. He said he absolutely wanted to buy it, the value went up, and then he sold his stake and made a big profit,” Sergeant said, referring to Vivendi’s sale of its 27% stake in the video game company for about $2.3 billion, which allowed Vivendi to make a capital gain of $1.4 billion.

If Vivendi were to buy out the new Banijay-Endemol Shine group down the line, that could raise red flags for the French antitrust board. Current antitrust regulations require French TV networks to dedicate 70% (for Canal Plus it’s 85%) of their investment obligations to third-party independent productions, and also limit ownership rights of French TV networks.

But a veteran industry executive said that, even with Banijay and Endemol Shine under its wing, Vivendi wouldn’t be as powerful as some might assume.

“Banijay and Endemol Shine are mostly leaders in non-scripted and Canal Plus Group is bigger in films,” the executive said. “All of them together would represent 10% at most of the French market.”

Last year, Canal Plus Group launched a division to produce scripted content in-house and teamed with Banijay on its first series, “Mouche,” a French adaptation of the Emmy-winning series “Fleabag.”

Both Sergeant and Godard pointed to the example of TF1, France’s leading commercial network, which a few years ago acquired production company Newen. But TF1 has so far seen limited synergies because of antitrust restrictions.

That could change as Netflix and other new platforms disrupt the media landscape and cause a rethink of how to maintain fair competition in the TV industry. “The regulations are being discussed now due to the arrival of new streaming services and could become more advantageous to TV networks, allowing them to increase their ownership of IPs and rely more on in-house production,” Sergeant said.