Vivendi Shares Fall Despite Asset Sale
As Vivendi Universal on Monday announced details of a plan to pull back from the water business in a move to cut its debts, investors continued to give its management a vote of no confidence, pushing down the company’s share price to a new low.
Vivendi said Monday that it will begin selling up to 15.6% of its water services utility, Vivendi Environnement, the world’s largest water company. The subsidiary also plans to sell new shares worth 1.5 billion euros beginning July 4.
The transactions were first announced last week as part of a plan to help Vivendi lower its debt by as much as $1.65 billion and reduce Vivendi Universal’s overall stake in Vivendi Environnement from 63% to 42%, the company said.
Chief Executive Jean-Marie Messier had hoped it would send a signal to investors that Vivendi was aggressively lowering its $30-billion debt, which has been criticized as excessive by analysts and credit rating agencies.
But the details of the plan, combined with other unwelcome news Monday, did little to dampen investor concerns.
U.S. shares of Vivendi Universal fell 14.7%, down $3.41, to $19.80. Shares of Vivendi Environnement fell 11.3%, off $3.59, to $28.11, both on the New York Stock Exchange. Vivendi shares were suspended twice in Paris on Monday.
The steep drop puts more pressure on Messier, who is losing the support of investors over his strategy and the company’s debt load. He meets with the company’s board of directors today during a regularly scheduled meeting.
Investors initially welcomed Vivendi’s plans to scale back its investment in the water business, transactions that the company said would only occur when market conditions were ripe. When the restructuring happened sooner than many expected, it raised questions about whether the company faces a cash crunch, analysts said.
“There’s concern in the market that Vivendi did this because they are facing a liquidity crisis,” said Mark Harrington, an analyst with J.P. Morgan & Chase. “My view is that’s very unlikely.”
Vivendi has about $11 billion of non-core assets it could sell off to cover its financial needs, Harrington said.
Vivendi declined to comment on the stock price slide but has denied facing any cash squeeze.
Adding to the uncertainty analysts said, were reports that Rupert Murdoch’s News Corp. may not buy Vivendi’s Italian pay-TV arm Telepiu, a deal which could help reduce Vivendi’s debt.
