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Vivendi was a significant detractor in March and has been a thorn in our side since last summer. The shares topped out in late July 2025 and have subsequently declined -50%, as the NAV has declined -38% and the discount has gone from 36% to 49% (a return of -20%). As we discussed in the November 2025 newsletter, the proximate cause of the widening discount was a court ruling in favour of Vincent Bollore, thereby largely eliminating the chance of him being forced to buy Vivendi minorities out in the near-term. Since this point however, there has also been considerable pain on the NAV side of the equation, as UMG shares have de-rated to a record low valuation and share price.

As we described in the July 2025 newsletter, since IPO, UMG has performed poorly as a stock in both absolute terms but particularly in relative terms – where its market cap has gone from parity with that of Spotify to c.1/3rd. Whilst growth has exceeded expectations, there has been considerable debate and disappointment around margins, free cash flow and capital allocation, with a further distraction of Bollore and a perceived overhang.

The full year results, published in March, in many ways encapsulated this, with much stronger than anticipated revenue growth, offset by weaker margins, and €404m of Royalty Advances and €280m of catalogue investments. We do not believe management have done a good job of explaining capital allocation (particularly with regard to Advances – which we view as more akin to growth capex), and nor always done a good job at allocating capital itself (particularly with regard to catalogue

investments – which we believe should be the preserve of more specialist vehicles with more suitable structures and costs of capital).

Whilst we have sympathy for the bears’ grievances and believe the company could be run in a much more shareholder friendly manner, we believe investors have become too despondent, with – at the end of March 2026 – the shares trading at c.13x 2026e earnings net of the stake in Spotify. We believe this value to simply be too cheap given UMG’s structural position in the music value chain and the attractive tailwinds from the re-monetisation of music.

It would appear others agree. In late March the company launched an inaugural €500m buyback programme; and in early April Bill Ackman/Pershing Square (“PS”) launched a proposed offer for the company at an ostensible +78% premium, by way of a proposed merger with Pershing Square SPARC Holdings, a blank cheque acquisition company.

The offer consists of 1) €5.05 per share of cash (equivalent to c.30% prior close price); and 2) 0.77 NYSE-listed New UMG shares – which PS “value” at €25. This latter value is predicated on New UMG trading at 25x 2027e EPS post accretion of cancelling 17% of shares outstanding as part of the proposed transaction. To state the obvious, the offer value is higher/lower if one assumes a higher/lower target PE multiple and as such, a certain degree of scepticism as to the value of this largely paper offer – as is reflected in UMG shares languishing <€20. Alternatively, investors can elect a cash offer of €22.

What happens next comes down to Bollore, who through Bollore SE and Vivendi controls c.28% of UMG. He is notoriously difficult to predict, and we will refrain from attempting to do so. Rather, what we can say, is that the Pershing Square proposal highlights UMG’s deep undervaluation and the significant self-help measures the company has at its disposal to unlock and create shareholder value.

Vivendi has been a bruising investment but not one we would consider to be a mistake. When a stock is becoming demonstrably cheaper in discount terms and the NAV fundamentals are solid, whilst also becoming cheaper, one can afford to be patient. Exactly what happens next is hard to predict, but Vivendi at close to a 50% discount and UMG deeply undervalued, the ingredients for attractive long-term returns are in place. The most obvious risk, from the perspective of Vivendi shareholders, would be for Bollore to accept a €22 offer and retain or re-invest capital within Vivendi, however such a scenario seems reasonably well discounted in the price.

Vivendi was a significant detractor in March and has been a thorn in our side since last summer. The shares topped out in late July 2025 and have subsequently declined -50%, as the NAV has declined -38% and the discount has gone from 36% to 49% (a return of -20%). As we discussed in the November 2025 newsletter, the proximate cause of the widening discount was a court ruling in favour of Vincent Bollore, thereby largely eliminating the chance of him being forced to buy Vivendi minorities out in the near-term. Since this point however, there has also been considerable pain on the NAV side of the equation, as UMG shares have de-rated to a record low valuation and share price.

As we described in the July 2025 newsletter, since IPO, UMG has performed poorly as a stock in both absolute terms but particularly in relative terms – where its market cap has gone from parity with that of Spotify to c.1/3rd. Whilst growth has exceeded expectations, there has been considerable debate and disappointment around margins, free cash flow and capital allocation, with a further distraction of Bollore and a perceived overhang.

The full year results, published in March, in many ways encapsulated this, with much stronger than anticipated revenue growth, offset by weaker margins, and €404m of Royalty Advances and €280m of catalogue investments. We do not believe management have done a good job of explaining capital allocation (particularly with regard to Advances – which we view as more akin to growth capex), and nor always done a good job at allocating capital itself (particularly with regard to catalogue investments – which we believe should be the preserve of more specialist vehicles with more suitable structures and costs of capital).

Whilst we have sympathy for the bears’ grievances and believe the company could be run in a much more shareholder friendly manner, we believe investors have become too despondent, with – at the end of March 2026 – the shares trading at c.13x 2026e earnings net of the stake in Spotify. We believe this value to simply be too cheap given UMG’s structural position in the music value chain and the attractive tailwinds from the re-monetisation of music.

It would appear others agree. In late March the company launched an inaugural €500m buyback programme; and in early April Bill Ackman/Pershing Square (“PS”) launched a proposed offer for the company at an ostensible +78% premium, by way of a proposed merger with Pershing Square SPARC Holdings, a blank cheque acquisition company.

The offer consists of 1) €5.05 per share of cash (equivalent to c.30% prior close price); and 2) 0.77 NYSE-listed New UMG shares – which PS “value” at €25. This latter value is predicated on New UMG trading at 25x 2027e EPS post accretion of cancelling 17% of shares outstanding as part of the proposed transaction. To state the obvious, the offer value is higher/lower if one assumes a higher/lower target PE multiple and as such, there is a certain degree of scepticism as to the value of this largely paper offer – as is reflected in UMG shares languishing <€20. Alternatively, investors can elect a cash offer of €22.

What happens next comes down to Bollore, who through Bollore SE and Vivendi controls c.28% of UMG. He is notoriously difficult to predict, and we will refrain from attempting to do so. Rather, what we can say, is that the Pershing Square proposal highlights UMG’s deep undervaluation and the significant self-help measures the company has at its disposal to unlock and create shareholder value.

Vivendi has been a bruising investment but not one we would consider to be a mistake. When a stock is becoming demonstrably cheaper in discount terms and the NAV fundamentals are solid, whilst also becoming cheaper, one can afford to be patient. Exactly what happens next is hard to predict, but Vivendi at close to a 50% discount and UMG deeply undervalued, the ingredients for attractive long-term returns are in place. The most obvious risk, from the perspective of Vivendi shareholders, would be for Bollore to accept a €22 offer and retain or re-invest capital within Vivendi, however such a scenario seems reasonably well discounted in the price.

Shares in Vivendi fell -20% over the month, as weak NAV performance (-6%) was compounded by a significant widening of the discount from 38% to 46% (a return of -14%).

In the July 2025 newsletter we provided an update on the investment in Vivendi. At the time we explained how – subject to a court appeal process – the AMF had declared that Vincent Bollore was obligated to make a mandatory offer for Vivendi. This followed a ruling by a Parisian court that he was deemed to be in de-facto control of Vivendi at the time of the December 2024 split-up transaction.

During the month the Cour de Cassation ruled in favour of Bollore’s appeal, arguing against the notion of de-facto control and asking the lower court judges to re-examine the case. In turn the AMF has suspended its ruling of a mandatory takeover offer on Vivendi whilst this process continues. We now face a wrought and long-winded legal process with an uncertain outcome and potential further appeals to appeals.

Net-net, however, the odds of a near-term mandatory takeover offer are meaningfully lower than a few weeks ago, and this has been reflected in a widening of Vivendi’s discount, which now stands close to 50%.

We believe this to be astounding value – wider than Vivendi’s historic discount when it was a more complex beast, and out of whack with other European holding company discounts today – but wholly concede that there are limited catalysts for this to narrow in the near-term.

Indeed, this serves as a great and painful reminder of the often-ethereal nature of events/catalysts – which have a habit of not occurring or taking longer to occur than many expect. In such scenarios, the NAV side of the equation is imperative to one’s return.

And in this vein we believe there is a lot to be excited about. UMG shares have underperformed significantly, having fallen -21% since late July (whilst the MSCI ACWI is up +10%). We believe a large portion of this weakness is attributable to more technical factors. More specifically there has been a multi-pronged overhang deterring new buyers in the form of: 1) an overhang from Bollore who was perceived to be a potential seller of UMG stock in the event of a mandatory takeover offer; 2) pressure from event driven investors who were long Vivendi and short UMG; 3) a continued overhang on account of the delayed US listing.

This has pushed UMG to a record low valuation – with the shares trading at <18x 2026 PE excluding the stake in Spotify. This de-rating stands in stark contrast to the fundamentals, which are improving. Streaming growth has been impressive in 2025 without any meaningful contribution from DSP price raises. As we look into 2026, with the benefit of streaming 2.0 deals and faster growth, there is a strong case that the market will start to reward this with a higher multiple, reflective of the company’s unique asset base and its potential to sustain growth over the long-term underpinned by the re-monetisation of music. All told, Vivendi remains one of the highest potential upside positions in the portfolio, with strong NAV growth prospects and a very wide discount. We added to the position over the month.

Shares in Vivendi fell -20% over the month, as weak NAV performance (-6%) was compounded by a significant widening of the discount from 38% to 46% (a return of -14%).

In the July 2025 newsletter we provided an update on the investment in Vivendi. At the time we explained how – subject to a court appeal process – the AMF had declared that Vincent Bollore was obligated to make a mandatory offer for Vivendi. This followed a ruling by a Parisian court that he was deemed to be in de-facto control of Vivendi at the time of the December 2024 split-up transaction.

During the month the Cour de Cassation ruled in favour of Bollore’s appeal, arguing against the notion of de-facto control and asking the lower court judges to re-examine the case. In turn the AMF has suspended its ruling of a mandatory takeover offer on Vivendi whilst this process continues. We now face a wrought and long-winded legal process with an uncertain outcome and potential further appeals to appeals.

Net-net, however, the odds of a near-term mandatory takeover offer are meaningfully lower than a few weeks ago, and this has been reflected in a widening of Vivendi’s discount, which now stands close to 50%. We believe this to be astounding value – wider than Vivendi’s historic discount when it was a more complex beast, and out of whack with other European holding company discounts today – but wholly concede that there are limited catalysts for this to narrow in the near-term.

Indeed, this serves as a great and painful reminder of the often-ethereal nature of events/catalysts – which have a habit of not occurring or taking longer to occur than many expect. In such scenarios, the NAV side of the equation is imperative to one’s return.

And in this vein, we believe there is a lot to be excited about. UMG shares have underperformed significantly, having fallen -21% since late July (whilst the MSCI ACWI is up +10%). We believe a large portion of this weakness is attributable to more technical factors. More specifically there has been a multi-pronged overhang deterring new buyers in the form of: 1) an overhang from Bollore who was perceived to be a potential seller of UMG stock in the event of a mandatory takeover offer; 2) pressure from event driven investors who were long Vivendi and short UMG; 3) a continued overhang on account of the delayed US listing.

This has pushed UMG to a record low valuation – with the shares trading at <18x 2026 PE excluding the stake in Spotify. This de-rating stands in stark contrast to the fundamentals, which are improving. Streaming growth has been impressive in 2025 without any meaningful contribution from DSP price raises. As we look into 2026, with the benefit of streaming 2.0 deals and faster growth, there is a strong case that the market will start to reward this with a higher multiple, reflective of the company’s unique asset base and its potential to sustain growth over the long-term underpinned by the re-monetisation of music. All told, Vivendi remains one of the highest potential upside positions in the portfolio, with strong NAV growth prospects and a very wide discount. We added to the position over the month.

In December 2024 we introduced a new position in Vivendi. At the time, Vivendi had just emerged from a process in which the historic sprawling media conglomerate had just split itself into four separately listed business: Canal+, Havas, Louis Hachette and Vivendi.

The last piece – Vivendi – remained home to a 10% listed stake in Universal Music Group (“UMG”), which accounted for c.90% of NAV, as well as a small collection of other (almost entirely) listed assets, and net debt.

We started to build a position in December 2024 on the day of the split and continued to add to the position throughout 2025 such that at the start of July, Vivendi was our fourth largest position and a 6.6% weight.

In many ways, Vivendi can be thought of as a quintessential AVI stock: 1) through UMG it offered exposure to a high quality and growing business, where we thought the prospects for NAV growth were appealing; 2) it traded at an inordinately wide discount of close to 50%; 3) although uncertain, there were potential catalysts for the discount to narrow.

In July 2025 the AMF ruled that Bollore is deemed to have effective control of Vivendi and as such is obligated to make a mandatory offer within 6 months. This follows an April 2025 court ruling that asked the AMF to revisit the case and the circumstances of the Vivendi split in 2024. In turn Vivendi and Bollore are currently appealing the Court of Cassation, and Bollore has also appealed the AMF ruling itself. It is our understanding that the appeals processes should run until December 2025 and that a dual-track process of cooperation with the AMF will occur in the interim.

The AMF ruling states that, in the event of an offer, Bollore must offer a “fair price”.  Since December 2024 Vivendi has published its own NAV – although – rather comically – we note no such figure was reported in their half year results published at the end of July 2025. The asset value is fairly indisputable, with the NAV being nearly entirely listed, and Gameloft being the only unlisted asset, for which they report(ed) a carrying value of €234m / 5% of NAV).

There are, however, two areas of uncertainty: 1) how to treat the central corporate costs (which run at ~€85m annually), 2) whether or not a “fair price” should incorporate a fair/holding company discount.

We do not intend to profess any great precision into exactly how these two issues will be treated, but instead highlight the 2017 at-NAV offer from the Arnault family for Christian Dior SE as a case study for the AMF ensuring fair value is offered.

Nonetheless, the prospects for a buyout offer are meaningfully higher than they were a month ago. This has been in part at least reflected in the narrowing of the discount – with the shares now trading at an a low 30s – discount to our pre-corp cost NAV. At this level we continue to see meaningful upside in the discount.

Turning to the NAV side of the equation, UMG shares have been weak of late following the publication of results at the end of July and the announcement that Cyrille Bollore is to step down from the board. This has pushed the stock -14% since from a recent late July peak to the time of writing (4^th August).

In terms of Q2 results these were something of a mixed bag. On the positive side, UMG has demonstrated 8.9% Subscription growth in H1, with only a modest tailwind from price rises. We continue to believe that the market is underestimating the extent to which this will further accelerate in 2026 under so-called Streaming 2.0 – with a guaranteed step-up in minimum per subscriber fees, and increased tiering of pricing allowing for greater stratification in spending between average consumers and those with propensity to spend more. All told, we believe UMG is well positioned to benefit from the continued (re) monetisation of music supporting strong long-term topline growth.

On the other hand, how this translates into margins and free cash flow is causing more debate. Margins have not expanded as much as one would have expected with 2025 adjusted EBITDA margins likely to be ~22.8% vs. consensus expectations of ~25.0% at the time of the IPO. As demonstrated in the most recent results, incremental margins have remained subdued in the high 20s and operational leverage has been held back. Part of this is mix effect, but there is also some investor scepticism as to how creative and capitalist traditions of UMG and financial markets meld, and the extent to which management are disciplined on cost and focus on the share price (which wasn’t helped by Lucien Grainge’s post prospectus compensation package).

The free cash flow picture also remains muddied, both in terms of Royalty Advances and Catalogue Investments. In H1 we with an exceptionally large (€377m) Royalty Advance Net of Recoupments outflow in H1 and guidance that this will not normalise to a lower FY figure (as was the case last year). The bears would argue that this is indicative of the pendulum of power swinging in the favour of artists, who are negotiating a harder and better settlement in what is a relatively zero-sum game. The more bullish interpretation is that UMG is simply fuelling future growth and higher advances today result in higher recoupments / earnings / free cash flow in the future. The truth probably lies somewhere between the two and we believe management can do a better job explaining this, as well as more generally improving communication and disclosure with the market. Indeed, we some analogies between UMG – still earlier in its life as a listed company, leading in a nascent asset class – and how the Alternative Asset Managers were misunderstood a decade ago.

UMG shares are currently only a little above where they closed following the September 2021 IPO (whilst the MSCI Europe has returned >50% and Spotify >200%). Indeed, the current enterprise value (€44bn) is only ~25% higher than the one (€35bn) at which Pershing Square invested in 2021, despite sales and EBITDA being ~44% and ~77% higher. Net of its €4.5bn in Spotify and other listed equities, UMG has a core equity value of just €22 per share, or a just under 20x 2026 earnings. We believe this to be good value for approximately a 30% share of global music, at a time when the industry is being transformed, with better monetisation and improving earnings quality.

The combination of UMG’s attractiveness, and the near-term potential catalyst in Vivendi’s discount, make us optimistic for prospective returns.

In December 2024 Vivendi – historic sprawling media conglomerate – split itself into four separately listed business: Canal+, Havas, Louis Hachette and Vivendi. The fund had owned a small position in Vivendi, on the premise that the proposed split had the potential to unlock value, however this excitement was tempered by our lack of enthusiasm for the Canal+, Havas and Louis Hachette.

The last piece – Vivendi – remained home to a 10% listed stake in Universal Music Group (“UMG”), which accounted for c.90% of NAV, as well as a small collection of other (almost entirely) listed assets, and net debt.

We started to increase the position in Vivendi in December 2024 on the day of the split and continued to add to the position throughout 2025 such that at the start of July, Vivendi was the second largest position and a 6.9% weight.

In many ways, Vivendi can be thought of as a quintessential AVI stock: 1) through UMG it offered exposure to a high quality and growing business, where we thought the prospects for NAV growth were appealing; 2) it traded at an inordinately wide discount of close to 50%; 3) although uncertain, there were potential catalysts for the discount to narrow.

In July 2025 the AMF ruled that Bollore is deemed to have effective control of Vivendi and as such is obligated to make a mandatory offer within 6 months. This follows an April 2025 court ruling that asked the AMF to revisit the case and the circumstances of the Vivendi split in 2024. In turn Vivendi and Bollore are currently appealing the Court of Cassation, and Bollore has also appealed the AMF ruling itself. It is our understanding that the appeals processes should run until December 2025 and that a dual-track process of cooperation with the AMF will occur in the interim.

The AMF ruling states that, in the event of an offer, Bollore must offer a “fair price”.  Since December 2024 Vivendi has published its own NAV – although – rather comically – we note no such figure was reported in their half year results published at the end of July 2025. The asset value is fairly indisputable, with the NAV being nearly entirely listed, and Gameloft being the only unlisted asset, for which they report(ed) a carrying value of €234m / 5% of NAV).

There are, however, two areas of uncertainty: 1) how to treat the central corporate costs (which run at ~€85m annually), 2) whether or not a “fair price” should incorporate a fair/holding company discount.

We do not intend to profess any great precision into exactly how these two issues will be treated, but instead highlight the 2017 at-NAV offer from the Arnault family for Christian Dior SE as a case study for the AMF ensuring fair value is offered.

Nonetheless, the prospects for a buyout offer are meaningfully higher than they were a month ago. This has been in part at least reflected in the narrowing of the discount – with the shares now trading at an a low 30s – discount to our pre-corp cost NAV. At this level we continue to see meaningful upside in the discount.

Turning to the NAV side of the equation, UMG shares have been weak of late following the publication of results at the end of July and the announcement that Cyrille Bollore is to step down from the board. This has pushed the stock -14% since from a recent late July peak to the time of writing (4th August).

In terms of Q2 results these were something of a mixed bag. On the positive side, UMG has demonstrated 8.9% Subscription growth in H1, with only a modest tailwind from price rises. We continue to believe that the market is underestimating the extent to which this will further accelerate in 2026 under so-called Streaming 2.0 – with a guaranteed step-up in minimum per subscriber fees, and increased tiering of pricing allowing for greater stratification in spending between average consumers and those with propensity to spend more. All told, we believe UMG is well positioned to benefit from the continued (re) monetisation of music supporting strong long-term topline growth.

On the other hand, how this translates into margins and free cash flow is causing more debate. Margins have not expanded as much as one would have expected with 2025 adjusted EBITDA margins likely to be ~22.8% vs. consensus expectations of ~25.0% at the time of the IPO. As demonstrated in the most recent results, incremental margins have remained subdued in the high 20s and operational leverage has been held back. Part of this is mix effect, but there is also some investor scepticism as to how creative and capitalist traditions of UMG and financial markets meld, and the extent to which management are disciplined on cost and focus on the share price (which wasn’t helped by Lucien Grainge’s post prospectus compensation package).

The free cash flow picture also remains muddied, both in terms of Royalty Advances and Catalogue Investments. In H1 we with an exceptionally large (€377m) Royalty Advance Net of Recoupments outflow in H1 and guidance that this will not normalise to a lower FY figure (as was the case last year). The bears would argue that this is indicative of the pendulum of power swinging in the favour of artists, who are negotiating a harder and better settlement in what is a relatively zero-sum game. The more bullish interpretation is that UMG is simply fuelling future growth and higher advances today result in higher recoupments / earnings / free cash flow in the future. The truth probably lies somewhere between the two and we believe management can do a better job explaining this, as well as more generally improving communication and disclosure with the market. Indeed, we some analogies between UMG – still earlier in its life as a listed company, leading in a nascent asset class – and how the Alternative Asset Managers were misunderstood a decade ago.

UMG shares are currently only a little above where they closed following the September 2021 IPO (whilst the MSCI Europe has returned >50% and Spotify >200%). Indeed, the current enterprise value (€44bn) is only ~25% higher than the one (€35bn) at which Pershing Square invested in 2021, despite sales and EBITDA being ~44% and ~77% higher. Net of its €4.5bn in Spotify and other listed equities, UMG has a core equity value of just €22 per share, or a just under 20x 2026 earnings. We believe this to be good value for approximately a 30% share of global music, at a time when the industry is being transformed, with better monetisation and improving earnings quality.

The combination of UMG’s attractiveness, and the near-term potential catalyst in Vivendi’s discount, make us optimistic for prospective returns.

At Vivendi, the ongoing rationalisation continues with the
company accepting a takeover bid for its Brazilian broadband
business GVT. We used the strength in the share price to take
partial profits on our holding. We had added to the position at
the end of June on price weakness, and the recent strength
allowed us to sell at a very narrow discount to our estimate of
NAV.

Apart from the investment in KT, the largest add-on investment we
made was Vivendi. Having reduced our holding substantially in
February when the share price almost reached €21, the shares have
drifted downwards and we added to our holding around the €18
level. Subsequent to this, the company announced that they had
received a bid for GVT, their Brazilian broadband company. A sale
of this asset, following the sales of SFR, Maroc Telecom and
Activision Blizzard, would leave Vivendi with two main businesses –
Universal Music and Canal Plus – and should see the conglomerate
discount evaporate.

Vivendi announced plans to return €5bn to shareholders
over the next two years. The amount represents approximately 20% of
the market cap of the company with the bulk being paid on completion
of the SFR sale in 2015.

We mentioned last month that there were two bidders for Vivendi’s
SFR. These came from Bouygues and Altice. As we write this
newsletter, the result of the bidding was has been announced and
the victor is Altice. Along the way, when it appeared Bouygues had
the upper hand its share price jumped by 12% over a two day period
and we took our profits and exited, realising a 26% IRR over our 6
month holding period. We retain our holding in Vivendi, having
reduced it earlier in the year, and await clarification from the
company on any return of capital which we believe likely given the
very substantial cash inflow it will see from the sale of SFR to Altice.

In addition, partial profits were taken in Vivendi with a small reduction in the size of the holding as the discount moved in to
single digits on the back of recent moves by management to spin off SFR and eliminate the conglomerate discount. The price was
also boosted by rumours of a possible bid for SFR, as an alternative exit route. There is still potential for further narrowing of the
discount and the speculation surrounding consolidation in the French mobile phone sector is positive for another holding,
Bouygues.