Vivendi SA has put the sale of its Brazilian telecoms operator on hold after failing to attract the €7-billion ($9-billion U.S.) it wanted from bidders, another setback for the French media and telecoms conglomerate's efforts to rationalize and reduce debt.
DirecTV Group Inc., the largest U.S. satellite TV provider, pulled out of the bidding for GVT on Thursday, leaving a consortium of private equity groups led by KKR as the only remaining bidder, with an even lower offer.
"GVT is a good asset and we'll continue to develop it," a spokesman for Vivendi said on Friday. "The offers we received so far are not satisfactory. We said all along that we would not sell assets at knock-down prices."
Shares in Vivendi were trading down 3.5 per cent at €16.07, the worst performer in the French blue-chip CAC 40 index. DirecTV shares rose. DirecTV shares rose 5.7 per cent by $3.05 to $55.64.
"Hopes of a radical shake-up of the group appear to be fading," UBS analysts said in a note, adding that the failure to dispose of GVT would put more pressure on Vivendi to succeed with its other big sale attempt, its 53-per-cent stake in Maroc Telecom.
The failure to sell GVT, which it bought just over three years ago, is Vivendi's latest disappointment since beginning a strategic review of its six business units in media and telecoms in the spring of 2012.
It first sought to unload its 61-per-cent stake in video games firm Activision Blizzard, but was unable to find a suitable buyer given the size of the business and price tag – Activision has a current market value of $16.8-billion.
A further option now would be to revive talks with cable operator Numericable on a deal for French mobile telecoms business SFR. Mergers with France's three other mobile operators have essentially been ruled out due to regulatory opposition.
Chairman Jean-René Fourtou has called the portfolio review Vivendi's "no taboo era" and his lieutenants have in the past year laid out a vision of a group with less exposure to the capital-intensive telecoms industry and more focused on media such as pay TV and music.
Its shares have risen about 30 per cent since late April, when word of the review emerged but Mr. Fourtou is now facing the prospect of having little to report on reshaping the group when he addresses shareholders at the annual meeting on April 30.
"Vivendi is seeking to present a disposal to shareholders ahead of its AGM," the UBS analysts said. "Should Vivendi also fail to sell Maroc [Telecom] then investor focus will shift to weakening earnings momentum and limited credit rating headroom."
The GVT auction was hampered by the fact the logical strategic buyers both present in Brazil – Spain's Compania Telefonica Nacional de Espana SA and Telecom Italia – were saddled with high debts, reeling from recession in Europe, and unable to bid.
That left only DirecTV, which is present in Brazil as a pay-TV provider, as a trade bidder able to pay a higher valuation for GVT because of the cost savings it expected to reap later.
It offered roughly €6-billion ($7.79-billion U.S.) in shares and cash, sources familiar with the situation told Reuters in late February, while Vivendi had wanted at least €7-billion.
Another person familiar with the situation said the option of a stock market listing for GVT had also been considered in the last couple of years.
"GVT management would love this option," the person said. "But the main issue is valuation. It's not clear that Vivendi would get the valuation they are looking for in an IPO."
Vivendi is now likely to step up efforts to sell its other telecom businesses, including its 53-per-cent stake in Maroc Telecom and SFR, said Liberum Capital analyst Ian Whittaker.
This could raise around €17-billion and allow the group to return billions to shareholders, he added.
The sale of Maroc Telecom, which has a current total market capitalization of nearly $11-billion, has better traction because there are three bidders – Qatar Telecom, the United Arab Emirates' Etisalat and South Korea's KT Corp. – banking sources have said.
But final offers for the business, which is 30-per-cent-owned by the kingdom, are not due until the end of April, according to two people familiar with the situation.