Vivendi Eases Expectations for Utility Unit IPO
Vivendi said it priced shares in its utility unit at 34 euros, or $31.45, raising about 30% less than originally planned, in an initial offering designed to reduce debt.
Vivendi Environnement shares were priced near the bottom of the $30.52 to $33.30 range used to take orders from investors. The shares are scheduled to start trading on the Paris stock exchange today.
Paris-based Vivendi last week cut the price of Vivendi Environnement stock by about 10% and delayed the share sale a second time, suggesting lukewarm investor demand. One reason cited was market conditions in France, where several other major IPOs have been postponed.
But some Vivendi investors also have expressed skepticism about Vivendi’s pending acquisition of Seagram Co. and its Universal film and music units, and whether Vivendi will successfully mesh the entertainment units with its wireless, telecommunications and television operations.
Vivendi has offered $34 billion in stock for Seagram. Vivendi also plans to fold in Canal Plus, the European pay TV company Vivendi controls, as part of a $47-billion, three-way merger.
Vivendi said it will use the IPO’s proceeds to cut debt at the utilities unit to less than $11 billion from about $14.8 billion now. Vivendi loaded most of its debt onto the utility unit, which the company believes can be serviced easily by the unit’s cash flow.
After the IPO and the Seagram and Canal Plus purchases, the utility business will make up less than 10% of Vivendi’s assets.
The initial offering is part of Vivendi’s efforts to transform a 147-year-old water utility into one of the world’s biggest media companies. The share sale will raise about $2.3 billion, about $925 million less than Vivendi had planned.
“Sure enough, they’re cheap,” said Yves de Vilmorin, who helps manage $1.3 billion in stocks at Banque Privee St Dominique. “But they’re probably going to stay cheap.”
Vilmorin said he hadn’t asked for shares, and didn’t plan to buy them. He made the comments before the final price was set.
Vivendi, which last month spurned a $27.8-billion offer for the unit from Germany’s RWE, said it will own between 66% and 72% of the unit.
Depending on how Vivendi Environnement shares perform and what percentage are traded, the stock may be added to France’s benchmark CAC-40 stock index. That may help boost its price, investors said, as funds that track indexes buy Vivendi Environnement to reflect its weighting.
Vivendi’s stock closed up 1% in trading in Paris. Seagram closed at $56 a share in trading on the New York Stock Exchange, up 38 cents.
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Bloomberg News was used in this report.
