Newsletters - Asset Value Investors

AGT

Bollore • Newsletter December 2024

In mid-2023 we (re)initiated a position in Bolloré (4.9% weight) – the French holding company controlled by Vincent Bolloré. The investment case was predicated on the attractive NAV growth potential from Universal Music Group (“UMG”); the potential value creation from Vivendi, the French media conglomerate; and with €6bn of net cash at the holding company level, the prospect for simplifications across the notoriously complex and deeply discounted Bolloré group structure. To date returns have been all but zero (+1.0% ROI).

During the month, Vivendi, of which Bolloré owns just shy of 30%, was split into four separate companies – Canal+, Havas, Louis Hachette and Vivendi – with the stated intention to unlock the conglomerate discount at which it traded. Prima facie this has been ineffective: the four sum of the parts now trade collectively at €8.2 per share, versus €8.3 the day prior to the split and €8.0 a little over a year ago when the intention to split up the group was first announced.

However, from a Bolloré perspective we wonder whether this is not such a bad thing after all. Having passively moved through 30% in each operating company, and with more lax shareholder protections, Vincent Bolloré may well exploit one or more of these undervaluations. Eighteen months ago, it was a consensus view that Vincent Bolloré would pay a control premium to take over the entire Vivendi conglomerate. As is often the case, he has dumbfounded fund managers and avoided putting his hand in his pocket. Ultimately Vincent Bolloré is motivated by long-term capital gains, not near-term mark to market movements and we have long been of the view that it makes most sense to be aligned with him at the Bolloré level, and hence we did not hold a direct position in Vivendi.

AGT

Bollore • Newsletter October 2023

Over the last few months, we have started to build a new position in Bollore SE (“Bollore”), the French holding company controlled by the mercurial Vincent Bollore. It is currently a 2.0% weight. Bollore trades at a 45% discount to our estimated NAV, which is principally comprised of listed stakes in Universal Music Group (28% of NAV) and Vivendi (10%), cash (23% pro-forma of the sale of Bollore Logistics) and self-ownership loops (32%) given the companies’ notoriously complex Breton Pulley ownership structure.

We have invested in both Bollore SE and Vivendi at various points over the last 15-plus years (and indeed, UMG more recently). However, we contend that we are now at a particularly interesting juncture. Having extracted the crown jewel asset (UMG) from Vivendi and monetised both Bollore Africa Logistics and Bollore Logistics for >€10bn, we are entering a period of value harvesting.

Pro-forma for the completion of the sale of Bollore Logistics, Bollore is sitting on €6bn of net cash. It is our expectation that over time, Bollore will look to own more of Vivendi, the French media conglomerate. This had been something of a crowded hedge fund trade, however – as he is prone to – Mr Bollore upset the apple cart earlier this year, partially reducing his stake in Vivendi to stay below the 30% threshold that would require a mandatory offer and allocating capital toward buying back Bollore shares.

This has sent Vivendi shares nearly 20% below their April peak, with the company now trading at a 43% discount to NAV. Indeed, at current prices the market is ascribing Vivendi’s unlisted stub assets, the largest of which are Canal + and Havas, a value of just €3.3bn (net of debt & other liabilities). This equates to a little over 4x 2024e operating profits.

We expect Bollore to exploit Vivendi’s lowly valuation – much to the benefit of Bollore’s NAV. Importantly, is often his modus operandi, this can be done with relatively minimal capital outlay. There are many different forms this can take, but the most obvious one to us is a monetisation of Vivendi’s €4.2bn stake in UMG, which accounts for 48% of Vivendi’s market cap (gross of any taxes). The proceeds of this could be used to launch a tender offer, thereby significantly reducing the remaining free float for which Bollore would be mandated to make an offer. Vivendi’s NAV excluding UMG stands at ~€11bn, and there are scenarios where Bollore can own 100% of this for an incremental capital outlay <€3.5bn (assuming a 25% premium).

When investing in Vivendi historically we always viewed these assets as the ugly duckling alongside the swan that was UMG. That said, the earnings power has proved relatively stable, and the businesses have ridden secular and cyclical challenges better than we would have expected. In particular, Canal+ is in much better shape than it was 5-6 years. The French pay TV business has entrenched its position as an aggregator and is growing its subscriber base once again with a sticky offering of sports and films; and outside of France, particularly in Africa but also in other parts of Europe and Asia, the business has built a subscriber base that looks increasingly strategically valuable.

Of course, as this year evidences, Mr. Bollore is famously difficult to predict and he has a history of dumbfounding investors and taking the opposite path to the one assumed. We are under no illusions that we are any different and are very open to the fact the above might well not occur. However, we believe that being invested higher up the holding company structure at the Bollore – not Vivendi – level gives us the alignment of interest and patience required when events invariably take longer to come to fruition than initially anticipated.

Moreover, the significant net cash position at the Bollore level raises the prospect of capital returns and structural simplifications. In 2023 we have already seen a tender offer and some tinkering transactions at other parts of the structure. Exactly what the endgame is remains to be seen but further tender offers and eventual share-based transactions between the different holding levels seem quite plausible. Given the wide levels of discount involved, such moves would be highly accretive.

Vincent Bollore has shown himself to be an astute capital allocator compounding shareholder returns at +12.5% p.a. since the turn of the millennium, outstripping the MSCI Europe (+3.6%) and the MSCI AC World (+4.9%). The prospect of aligning capital with such an operator, at a time where there are numerous corporate catalysts, makes for an attractive investment.

AGT

Bollore • Newsletter October 2016

Our holding in Bollore was exited in full to fund
investments elsewhere in the portfolio where we see greater upside.

AGT

Bollore • Newsletter February 2016

Bollore, a French holding company with a stellar performance record, is
a new position established this year. Led by veteran French
industrialist/activist Vincent Bollore, the company owns market-leading
African logistics/ports assets as well as substantial stakes in listed
companies including Vivendi. Having de-rated sharply at the end of
2014, we acquired our stake at a discount to NAV in excess of 30%.