BOL.PA - Bollore

[Peregrine]

I'm not sure I understand this whole share count arbitrage thesis.

 

If Bollore subsidiaries own a big piece of Bollore, then the value (numerator) of those subsidiaries must also be subtracted from the net asset value to get at the net asset value per share. You can't just reduce the denominator without doing anything to the numerator.

[no_free_lunch]

My thesis is that at the end of the day it is more or less a closed system.  So Bollore does own nearly all of the subsidiaries assets. 

 

I would look at the muddy waters white paper and in particular how dividends flow through the system.  The dividends go from bollore to you (shareholders), the subs, etc.  You keep your portion, but the subs are owned by bollore so they pay it back to bollore and around you go again.  In the end the dividends are filtered out by external owners (e.g. you and other shareholders) at each pass. 

 

None of that probably makes any sense.. I built a simple model of it in a spreadsheet.  It sounds complex but it only took an hour and the Bollore complex isn't really that difficult once you see it in action.

[Peregrine]

My thesis is that at the end of the day it is more or less a closed system.  So Bollore does own nearly all of the subsidiaries assets. 

 

I would look at the muddy waters white paper and in particular how dividends flow through the system.  The dividends go from bollore to you (shareholders), the subs, etc.  You keep your portion, but the subs are owned by bollore so they pay it back to bollore and around you go again.  In the end the dividends are filtered out by external owners (e.g. you and other shareholders) at each pass. 

 

None of that probably makes any sense.. I built a simple model of it in a spreadsheet.  It sounds complex but it only took an hour and the Bollore complex isn't really that difficult once you see it in action.

 

What I meant was: the sub's stakes in Bollore must then be subtracted from NAV to avoid double counting yes?

[no_free_lunch]

Yes you are correct.  I think the companies NAV already does this but to get around these complexities I just use fair value estimates I have seen.

[ebdem]

The reason for this kind of "messy" structure is in my eyes:

[*]Bolloré created this structure for tax purposes.

[*]He made buybacks whenever one of his subsidiaries had cash. So a lot of the stocks are held in this special structure.

 

Did someone take a look at the debt? I think the debt is consolidated in the report of Bolloré, but I am not sure.

 

In a presentation of David Marcus, which I can't share here, I saw a table on the aquisition and selling history of Bollorè. It is quite interesting how he made money out of nearly every deal he made.

 

One very interesting holding is Telecom Italia. It is held through Vivendi, which should have a fair value of 30 €. TIM is turning around recently: http://www.telecomitalia.com/tit/en/investors/presentations/2017/FY2016-preliminary-group-results-plan-update.html

 

Greenwood Investors do offer a quite interesting report on Bolloré and TIM.

[ebdem]

Here are some great insights in Bollore: http://evermoreglobal.com/media/pdfs/Q4-2016-Transcript-Final.pdf?utm_term=Q4-2016-Transcript-Final.pdf&utm_campaign=Evermore%20Global%20Value%20Fund%20-%20Fact%20Sheet%2C%20Commentary%20and%20Call%20Transcript%20for%20Q4%202016&utm_content=email&utm_source=Act-On+Software&utm_medium=email&cm_mmc=Act-On%20Software-_-email-_-Evermore%20Global%20Value%20Fund%20-%20Fact%20Sheet%2C%20Commentary%20and%20Call%20Transcript%20for%20Q4%202016-_-Q4-2016-Transcript-Final.pdf

[no_free_lunch]

Result came out a few days ago for Bollore.  Not great numbers but then not at all unexpected.  If you look back at their history they go through waves of contracting and then expanding BVPS.  When they start the next up-wave the BV discount should shrink considerably in addition to the actual increase in BV.  I still think there is considerable upside here.

 

https://globenewswire.com/news-release/2017/03/23/943719/0/en/BOLLORE-2016-results.html

[Shane]

Has anyone identified a clear path for the structure to be simplified?  If the structure was created to avoid tax consequences, would a simplification be possible without paying tax?

 

The 'share count arbitrage' thesis relies on the market figuring out this complex structure or the simplification to take place.  It doesn't seem like an obvious bet to me, curious what others think.

[no_free_lunch]

So hopefully someone more knowledgeable can answer but here is my take.

 

Don't invest on the share count arbitrage alone.  I view it as an extra lever they have available for them.  Just one example of what they can do (and did do with Havas) is to take the Bollore shares that are held by the subs and use them to buy other companies.  You don't want them to do that when the discount is large but nevertheless it is like free shares from the public shareholders perspective.  That is one way to unwind it.  In reality it is not going to completely unwind anytime soon but they can do this type of thing as needed.

 

So you have this lever and you have the CEO who has been a great capital allocator historically and can opportunistically use the complexities of the structure to add value.  It is a bid of a Malone situation in that the more complexity there is the more opportunities there are for him.

[ebdem]

Did you have this video already posted?

 

Bolloré, as no_free_lunch said, is also a very good capital allocator. He compounded better as Buffett in the recent years. The investments in Vivendi and TIM are great chances. I think the whole thing can play out very good, even if not all cataclysts are realizied.

[LowIQinvestor]

Thanks for sharing

 

For me, Vivendi is simpler to understand (VIVHY)

 

We are aggressive buyers at today's price.

 

http://www.digitaltveurope.net/666462/vivendi-chief-sees-future-in-horizontal-convergence/

[ebdem]

Vivendi is definatly interesting and easier to understand. I hold some shares.

 

In my eyes Vivendi has three pillars: 1. Canal+ 2. Universal Music 3. the financial investments (mostly TIM and Ubisoft). You might also add Gameloft and the other growth projects as pillar nr. 4 - but it's a small pillar.

 

1. Canal+ is turnaround story - both also a growth story. The consumers in Africa grow with more then 10% YonY, which is great. But the french business is shrinking and creating a loss of 400 mio € this year. Bolloré is pushing to change that, but it's no easy push. I think there is a potential to get the french part of the business in the winning zone again. But I am not that sure, how long this will take and how this will play out. It's a dance on the small line between cutting costs, staying attractive and competitve against Netflix and Co and investing in distribution and innovation. The deal with Mediaset can be very helpful, but it's still only a struggle.

@LoWIQinvestor: What is your assumption on the future of Canal+?

 

2. Universal Music is a lovely way to participate in the growth of streaming. Every 9,99 € a Spotify Customers pays are around 2,50 € for UMC - and this income is on a higher margin basis, cause there is no physical distribution needed. This already shines through the numbers. Also streaming has more potential as CDs. CDs are something for the developed countries, like USA, Japan and the EU. Streaming needs less infrastructure - just a smartphone. Streaming growth is strong - 60% YonY. But at the moment it is still eating the share of the other ways of music distribution.

 

3. I like the investment in TIM, which is undervalued, too (see the report of Greenwood Investors). The current share price is still below the level Vivendi paid, but there will be a return for this investment. TIM is performing good - and the share price barely noticed it.

I am still a bit puzzled on the investment in Ubisoft. They don't control it and I am still not sure where to find the synergies.

 

What I also like is the buyback of Vivendi's shares. Vivendi buys below the level of 17 €. So you have a clear signal for the entry. See more here: http://www.vivendi.com/en/investment-analysts/regulatory-information/treasury-share-transactions/

[no_free_lunch]

Vivendi put in a bid to buy Havas equity stake from Bollore.  It is for a small premium to the share price and synergies have not been identified.  I am not sure I understand the angle other than given the nature of the business it does fit better with vivendi.  The stock has surged in the past few years so also possible Bollore just sees it as over-valued.

 

French tycoon Vincent Bollore took a first step on Thursday in his attempt to merge media giant Vivendi and advertising company Havas, two groups he controls through his family-run conglomerate.

 

Vivendi said it was making an offer to buy Group Bollore's 60 percent stake in advertising group Havas for 9.25 euros a share, a premium of 8.8 percent over Wednesday's closing price, in a 2.36 billion euro ($2.6 billion) deal.

..

If Bollore's conglomerate agrees to sell its stake in the ad company, Vivendi plans to launch a simplified public tender offer on the remaining 40 percent of Havas at the same price, without seeking to delist the company, it said.

 

Vivendi said a merger with Havas would strongly increase its group margins but did not provide details on the potential synergies between the two groups. It said it aimed to close it by the end of June, beginning of July.

..

Havas, led by Bollore's son Yannick, was one of the two top targeted businesses in Vivendi's next expansion phase, two sources close to the matter said last month.

 

"Our groups evolve in a common world, some of our teams already know each other and our cultures look alike and complete each other," the Havas CEO said in an internal email obtained by Reuters.

 

http://www.cnbc.com/2017/05/12/bollore-makes-first-step-to-merge-vivendi-and-havas-with-2-point-4-billion-euro-deal.html

[no_free_lunch]

Came across some news regarding succession, as well as plans around Vivendi.

 

Vincent Bollore said on Thursday he wanted his son Yannick to eventually take over as chief executive of Vivendi, the French media group where Bollore is chairman and leading shareholder.

 

Bollore, aged 65, has already stated his plan is to hand over his majority-owned Bollore Group to his four children in 2022, the year of the conglomerate's bincentenary.

..

Asked by a shareholder on Thursday about the possibility of spinning off Universal with an initial public share offer, Bollore confirmed that the group's teams were reviewing that option.

 

"The value (of UMG) increases every day and it's true that an IPO would be an interesting thing," he said. "The key question for an IPO is to know when is the best time to do it. It's like cheese puffs, you have to take them out at the right moment."

 

https://www.usnews.com/news/technology/articles/2017-06-01/bollore-lines-up-son-yannick-to-take-over-at-vivendi

 

This stock does not appear to be the bargain it once was, although perhaps it is still somewhat under-valued.  Anyone have any thoughts on valuation?

[ebdem]

Valuation is a bit higher now and it doesn't scream buy me. But nethertheless half of the stocks are still held in the company, Vivendi seems to be going well, TIM seems to be going well. The Africa business in Bolloré is quite interesting, logistics and oil are performing good, the sell of Havas will reduce the debt of Bolloré.

2022 can also give a timeline, that gives Vincent the opportunity to release a lot of value by simplyfing the shares structure.

[ebdem]

This presentation might be interesting: http://valuexvail.com/wp-content/uploads/2017/07/bollore-tindell.pdf

[awindenberger]

This presentation might be interesting: http://valuexvail.com/wp-content/uploads/2017/07/bollore-tindell.pdf

 

Thanks!

[fareastwarriors]

Bollore's Ugly Deal Gets Uglier

https://www.bloomberg.com/gadfly/articles/2017-08-31/vivendi-bid-for-havas-gets-even-uglier

[no_free_lunch]

Fareast. Good link. Based on that bollore got vivendi to buy havas at 40 to 50 pct premium to market multiples. Bollore owns enough havas that i think it more than offsets vivendi which they also have ownership in getting a raw deal. They also sold it at a time that revenue growth is decelerating. Wicked but shrewd.

[Scunny Bunny]

Our little investment company had its AGM today featuring the bear case on bitcoin, bull cases on AC and BOL.PA. A few slides in it might help you pull apart the empire. https://www.nsx.com.au/ftp/news/021734052.PDF

[no_free_lunch]

https://www.bloomberg.com/news/articles/2017-10-17/this-is-how-a-french-billionaire-retires

 

French billionaire Vincent Bollore plans to retire on Feb. 17, 2022, the 200th anniversary of his family-held Bollore Group.

 

..

 

He’s hitting obstacles on all fronts. Politicians, regulators, minority shareholders and would-be targets are resisting his attempts to use Vivendi SA to swallow leading broadcast, communications and video-game companies in Italy and France. Since he started building his controlling stake in Vivendi, Bollore has bought and sold 42.6 billion euros ($50.6 billion) in corporate assets—and it’s not clear what he’s gotten for it.

 

In addition to the pushback, Vivendi, which Bollore controls through a 21 percent minority stake, has been roiled by conflict at its units as he slashes costs, sheds assets and splashes out on acquisitions. Net cash has sunk from 8 billion euros in September 2015 to barely 500 million in June.

[SI]

If anyone else has done more work on the PFIC status here, I would appreciate hearing what you learned. My read is that ODET is not a PFIC because  of the “look through exception” to the PFIC code(link below) as ODET FP is the 63% owner of BOL FP but would love to know if anyone else has crossed this bridge?

 

thanks,

SI

 

https://www.law.cornell.edu/uscode/text/26/1297

 

[no_free_lunch]

If Spotify, which isn’t yet profitable, will soon be worth $20 billion, as some investors predict, Universal should be valued at more than $40 billion, argues JPMorgan analyst Daniel Kerven in a recent report.

 

What’s remarkable about that estimate is that Vivendi (ticker: VIV.France) recently had a stock market value of 30.3 billion euros, or $36.9 billion.

 

“You pay for Universal Music, and you get everything else for free,” says David Marcus

..

Valuing Vivendi is complicated because some of its assets produce little or no income. Its shares trade at 24 times the 2018 earnings consensus. Many analysts use a sum-of-the-parts analysis, rather than a price/earnings comparison in forming price targets.

 

JPM’s Kerven is a bit of an outlier, with a target of €42, implying 76% upside from a recent €23 and change. Evermore’s Marcus sees the stock moving “into the high €30s,” and says a Universal spinoff is a possibility, but he hopes Vivendi keeps it.

 

https://www.barrons.com/articles/vivendi-looks-cheap-in-light-of-spotifys-valuation-1515813894

 

Bollore owns 20% of vivendi and it is a significant portion of Bollore's NAV.  Just off the top of my head the vivendi stake is probably close to 50% of bollore's market value.

 

In spite of the 50-60% run up last year, Bollore still appears attractively priced. 

[ebdem]

You are right, it still seems attractive to invest via bollore in vivendi. Might be a good option.

What I haven't understood totally is the havas transaction. Did anyone of you spend some time on it? I am curious what upside optionalities you see there.

[no_free_lunch]

I think the upside was to Bollore and it occurred when the transaction closed.