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Vivendi's grandpa gunman loads the last bullet

Source : REUTERS
Last Updated: Sun, Aug 05, 2012 13:20 hrs
Jean-Rene Fourtou, Chairman of the Supervisory Board of Vivendi, attends the company's annual general meeting in Paris

By Sophie Sassard and Leila Abboud

PARIS (Reuters) - Vivendi has called on 72-year-old chairman Jean-Rene Fourtou, who saved the group from bankruptcy a decade ago, for one last service: to write what could be the once-proud French telecom-to-entertainment group's closing chapter.

Fourtou let long-time CEO Jean-Bernard Levy go in late June after disagreements over whether asset sales or a break-up were the best way to reverse a deep share slump, and the group is in no rush to find a new chief executive.

With Fourtou now firmly in charge, Vivendi is in what the chairman calls a "no taboo" era and could eventually sell off huge chunks of its six business lines, which include video games, pay-TV, music and telecoms and have failed to produce any benefits by being together.

A shrewd dealmaker and avid sportsman, Fourtou made his name as chief executive of pharmaceutical maker Aventis before he was parachuted in to run crisis-hit Vivendi in 2002, where he kept creditors at bay and oversaw about 12 billion euros in asset sales, including book publishing.

Today, shareholders are betting that Fourtou can pull something out of the hat again. Vivendi shares are up about 10 percent since Levy bowed out.

One shareholder who knows Fourtou said the fact that much of his family's wealth is tied up in Vivendi shares meant he would not shirk from tough decisions.

"If restoring value to shareholders involves a break-up of the business, he will do it," said the shareholder. "He is a pragmatic man and a real business leader."

Fourtou will rely on help from long-time allies among France's business elite, such as Axa founder Claude Bebear, who is no longer on Vivendi's board but is still involved, and Henri Lachmann, chairman of Schneider Electric , a veteran board member.

The three are internally dubbed the "grandpa gunmen", according to Les Echos newspaper.

A Paris-based banker suggested Space Cowboys as a more appropriate sobriquet, after the film of that name, starring Clint Eastwood and James Garner as astronauts called out of retirement for one last mission.

NEXT STEPS

In recent weeks, a parade of investment bankers has visited the company's plush Paris headquarters to pitch to Fourtou and his lieutenants on sales of assets including games unit Activision Blizzard , Brazilian telco GVT, and Maroc Telecom.

The names of several candidates to become the new CEO, including ex-Goldman Sachs banker Yoel Zaoui, GE Europe head Clara Gaymard, and former Apple Europe chief Pascal Cagni, are circulating internally, according to people close to the matter.

But hiring a new CEO to lead the management committee that sits on top of Vivendi's six business units, which each have their own bosses, is not an immediate priority. The committee itself was cut from seven to two members when Levy left, in a sign that some analysts and investors interpreted as paving the way for asset sales or a break-up.

A banker who has worked with Vivendi said Fourtou's current priority is to redesign strategy, cut costs, focus on cash generation and debt reduction so that the group can announce disposals or other measures to please frustrated shareholders relatively soon.

"He will spend the next six coming months at least sketching out a new strategy and then find a CEO to enforce it."

SHADOW OF 2002

Raised in southwest France in a middle-class family with a mathematics professor for a father, Fourtou earned his entry to the business elite at the country's top engineering school L'Ecole Polytechnique, where he met Bebear. Their close friendship would shape Fourtou's career.

It was Bebear who lured him to Vivendi in 2002 when the company, which traces its roots to a water utility founded by Napoleon III in 1853, was on the brink of bankruptcy after former CEO Jean-Marie Messier spent with abandon in pursuit of his vision of an integrated telecoms-and-content empire.

Fourtou was known for his restructuring skills. In the 1980s-1990s as CEO of Rhone-Poulenc, he split up the company's chemical and pharmaceutical businesses and later engineered a merger with a German rival to create Aventis, then Europe's biggest drugmaker.

At Vivendi, he convinced France's top banks not to cut off the group's credit lines and organised fire sales of its publishing and non-French pay-TV units. He shuttled back and forth to Hollywood to untangle Messier's ill-fated foray into entertainment, auctioning off Universal Studios and USA Networks.

But Fourtou showed he could do more than just sell. He outmanoeuvred partner Vodafone to take control of French telco SFR, just as Vodafone was trying to do the same while Vivendi was on the ropes.

"Fourtou is able to take quick decisions and be where no one would expect him," said a banker who worked with Vivendi during the period. "Buyer one day, seller the next, while always creating value. He's capable of really bold things."

Fourtou amassed a pile of Vivendi shares during this period and was criticised in the French press for his extravagant lifestyle and growing pay packages. He used Vivendi's plane to fly to Morocco where he has a second home with his wife, a deputy in the European Parliament, wrote Liberation newspaper.

Yet even once the crisis was over, Fourtou and his successor as CEO Levy were never able to prove to markets that the disparate businesses were worth more together than apart.

For example, cash cow SFR rarely worked with pay-TV unit Canal+, even though it marketed TV with its broadband and phone packages, and when SFR launched a music service it did so with an outside company instead of working with in-house Universal Music Group.

A senior banker who has advised the board said Fourtou and the management had long tried to mask that the company was more a "fund" of unrelated businesses than a cohesive whole.

"Now they've finally understood that they can no longer be in denial. But it's already too late. Vivendi is now seen as a distressed company. Lack of vision, lack of anticipation, that's a bit the story of Vivendi's life," he said.

BOLLORE AS CATALYST

With shares nearing nine-year lows this spring and still no synergies in sight, investors' patience was running thin.

Fourtou realised this and in March penned a letter to shareholders to say that all strategies to erase the dreaded conglomerate discount were now on the table.

He also welcomed the arrival of French industrialist Vincent Bollore as a Vivendi shareholder. The 60-year old corporate raider will join the board this autumn after taking Vivendi shares in exchange for two of his TV channels, sparking investor hopes that he would help with deal-making and restructuring.

For now, investors seem content to give Fourtou some time.

"There is no urgent financial pressure; Vivendi's businesses still generate strong cash," said Marine Michel, portfolio manager at Montsegur Finance, which owned Vivendi shares as of June 30, according to Reuters data. "I think the group has the time to make the decisions that will be best for it."

Bankers pitching for Vivendi business agreed that the group was likely to take its time figuring out what to sell and at what prices. Goldman Sachs and Barclays recently searched for buyers for its 60 percent stake in Activision, worth about $8 billion, but found no takers at the price it wanted.

Vivendi also began exploring a sale of Brazilian telecom unit GVT, which could bring in around 8 billion euros, Reuters revealed in mid-July.

Jean-Rene Fourtou was not available for an interview for this story, and the company won't talk about asset sales.

"Vivendi wants to take its time to review all its strategic options," a spokesman said.

The senior banker who advised the board was more forthcoming.

"The business model is dead, and the dismantling is now unavoidable. They have five years to sell everything."

(Additional reporting by Gwenaelle Barzic and Christian Plumb; Editing by Will Waterman)




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