PARIS / LONDON (Reuters) — France's
Vivendi said on Friday that its board needed more time to weigh two
bids for its SFR telecom business, leaving business and political
circles in suspense over a month-long, 15 billion euro takeover
The move came after Bouygues, the outsider in the race but favored
by the French government, submitted a last-ditch offer for SFR that
put an extra 1.85 billion in cash on the table, taking the total to
15 billion euros ($20.6 billion) plus shares.
Before Bouygues' latest gambit, cable group Numericable had been
best-placed to win after Vivendi's board chose it on March 14 for
three weeks of exclusive talks.
Numericable's last public offer would have given Vivendi 11.75
billion euros and a 32 percent stake in the new company. But sources
close to the deal said it had improved its bid since then to close
the gap with Bouygues.
The 13 members of Vivendi's board met for about five hours on Friday
"The board will continue to work over the weekend," said a Vivendi
It remains to be seen if the board of Vivendi, which is selling SFR
as part of a strategy to refocus on its media businesses, will be
convinced by Bouygues' latest move — its fourth bid — or stick with
its original preference for Numericable.
There could be more twists in the tale if the government weighs in.
Industry Minister Arnaud Montebourg sided openly with Bouygues last
month, arguing that going down to three mobile operators from four
would calm "destructive competition".
Both suitors for SFR are backed by billionaire businessmen who have
put their all into the fight, lobbying France's government for
support, pledging not to cut jobs after the deal, and hitting up
debt markets for funds to fuel their bids.
Martin Bouygues, the scion who runs the family-owned
construction-to-media group, wants to buy SFR to save Bouygues
Telecom, France's third-biggest mobile operator, which has been hit
hard by a fierce price war.
Franco-Israeli tycoon Patrick Drahi, Numericable's backer, dreams of
marrying his cable group with SFR to create a "national champion" in
high-speed broadband and mobile.
Despite Vivendi rebuffing Numericable's first run at SFR in 2012,
Drahi was so confident he had won the prize this time that he told
reporters at a press conference on March 17 that the three-week
exclusivity was a formality during which lawyers would finalize the
Claudio Aspesi, analyst at Bernstein Research, said the latest bids
were not far apart, however.
"Neither bidder has come in with something that trumps all.
Investors had hoped the bidding war would lead to higher valuations
being offered," he said.
"Instead it has just led to changes in the split of cash and equity
being held out."
Before the latest offer, Vivendi was concerned about the regulatory
and execution risks of picking Bouygues, which would cut France's
mobile players to three from four, and was leaning towards sticking
with Numericable since it offered a quicker exit from telecoms, the
Since Bouygues Telecom is not listed, an initial public offering of
the new company would be done in mid-2015, meaning Vivendi could not
sell its stake in the new company until then.
To come up with the extra cash for its Friday bid, Bouygues signed
up eight outside investors, including France's state-backed CDC fund
and French powerbrokers such as the Pinault, Dassault and Decaux
Bouygues said the latest bid valued of SFR at 16 billion euros
before cost savings and at 16.5 billion with an "earn-out" clause
that would give Vivendi 500 million euros more if certain milestones
were met after the flotation.
Numericable's last public offer valued SFR at 15.3 billion euros
before cost savings, said a person close to the bid.
Bouygues would own 51 percent of the new group, the outside
investors 39 percent, and Vivendi 10 percent. The other partner
investors were insurer AXA, the Ontario Teachers' Pension Plan
Board, Reuben Brothers Ltd, and Singapore sovereign wealth fund GIC.
The sale of SFR will reshape Europe's third-biggest telecoms market
after two years of a fierce price war brought on by the arrival of
low-cost player Iliad to the mobile arena.
For Vivendi, a sale of SFR would cap a strategic overhaul that began
in spring 2012, when veteran chairman Jean-Rene Fourtou declared
there would be "no taboo" in re-examining the 160-year-old group's
unwieldy holdings that ranged from video games to telecoms in
Fourtou became convinced that Vivendi should exit telecoms after
seeing the damage wrought by Iliad's Free Mobile service.
Once a cash cow, SFR saw its operating profit halve from 2011 levels
to 1.07 billion euros last year. SFR accounted for more than half of
Vivendi's 2013 sales and profits.
Fourtou, and deputy board chairman Vincent Bollore, see Vivendi's
future in its pay-television unit Canal+, Universal Music Group and
Brazilian broadband specialist GVT. They are expected to use some of
the proceeds of the SFR sale to pay down debt and reward
shareholders, while the rest would go to acquisitions to fulfill
Vivendi's ambitions in media.
($1 = 0.7303 euros)
(Additional reporting Matthieu Protard;
editing by Stephen Coates,
Andrew Callus and Hugh Lawson)