Jean-Bernard Levy, the Vivendi SA (VIV) chief executive officer who has resisted investor calls for a reorganization to revive a stock trading near a nine-year low, is preparing to step down, said people familiar with the matter.
Levy, 57, plans to depart after 10 years at the Paris-based telecommunications and media company, including seven years at the helm, said the people, who asked not to be identified before an announcement. Vivendi’s supervisory board is meeting today to discuss Levy’s future, said one person.
Vivendi jumped as much as 7.5 percent on the Paris exchange. Levy has been criticized by shareholders asking for plans to tackle the low valuation of the owner of Universal Music Group, video-game publisher Activision Blizzard Inc. (ATVI:US) and phone divisions in France, Morocco and Brazil. Vivendi has been considering an overhaul of its structure, including a possible sale of Activision Blizzard and a spinoff of pay-TV unit Canal Plus, which is 20 percent owned by Lagardere SCA (MMB), people familiar with the matter have said.
“Levy’s resignation makes it more likely that we’ll see steps toward structural changes, since he was seen as a defender of the group’s structure” said Mirko Maier, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. “The likelihood of major asset sales or even a split-up is increasing.”
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Vivendi rose as much as 1 euro to 14.46 euros and closed 5.5 percent higher at 14.20 euros in Paris.
Vivendi officials didn’t return phone calls and an e-mail seeking comment.
Michel Combes, the Vodafone Group Plc (VOD) executive who was due to join Vivendi as head of the SFR French mobile-phone unit on Aug. 1, will no longer take that role, two people familiar with the matter said. A Vodafone official declined to comment.
SFR’s top union representative, Geoffroy de Vienne, wrote in a letter today to Levy, Vivendi Chairman Jean-Rene Fourtou and personnel chief Stephane Roussel that the management must come up with an “industrial strategy.” He also said that an exceptional supervisory board meeting had been called.
Levy and Fourtou have disagreed for months over the need to revamp Vivendi’s structure, people familiar with the situation said. The CEO resisted major asset sales or a breakup of the company he helped build up when he acquired Activision Blizzard and Brazilian phone operator GVT, and negotiated a deal on SFR, the people said.
The differences between the two executives’ views were apparent during last weekend’s management summit, and were exacerbated by a U.S. court decision this week to fine Vivendi $956 million over a 2001 transaction with Liberty Media Corp., they said.
Vivendi’s stock is down 18 percent this year through yesterday, valuing the company at 17.3 billion euros ($21.5 billion). The shares had fallen more than 30 percent since Levy announced his latest deal in April 2011 -- the 7.95 billion-euro buyout of the SFR venture with Vodafone. Cheaper phone packages from competitor Iliad SA (ILD) have since cut into SFR’s profit, and now Vivendi doesn’t expect earnings for the entire company to grow again until 2014.
Levy joined Vivendi in 2002 as chief operating officer after an acquisition binge under former CEO Jean-Marie Messier left it on the brink of collapse. After rising to CEO, Levy blocked Norwegian investor Alexander Vik’s attempt to break up the company in 2006.
Moody’s Investors Service and Fitch Ratings added pressure this week by saying Vivendi’s debt ratings could be threatened unless the company shows it can reduce its liabilities. Vivendi’s net debt increased to about 12.5 billion euros at the end of March, nearing the level reached a decade ago.
Fitch yesterday cited potential legal damages related to a $956 million verdict this week in a U.S. lawsuit over Vivendi’s 2001 purchase from Liberty Media Corp. of a stake in USA Networks Inc. Vivendi said it would appeal the ruling.
The cost of insuring Vivendi’s bonds using credit-default swaps fell as much 3 basis points, or 1.6 percent, to 198 basis points following the news, according to Bloomberg prices. Still, that cost has increased 15 percent since the beginning of the year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Meanwhile, European regulators have a Sept. 6 deadline to rule on a bid by Universal Music to acquire EMI Group’s recorded-music business, which they have said would create a company almost twice the size of the next-largest player in Europe. Universal may not be sufficiently constrained by smaller competitors, customers’ buying power or illegal music downloads, the EU said when it opened an in-depth probe in March.
Vivendi failed to shed light on its long-term strategy after a meeting of top executives last weekend outside Paris. Instead, Levy told a private gathering of investors in London on June 26 that he would focus on cutting costs at SFR, people with knowledge of the matter said.
Levy and Fourtou already faced calls to change managers and invite new members to the board at the company’s shareholder meeting this year.
“Our conglomerate discount has become gigantic, close to 40 percent,” Fourtou said on April 19 in Paris. “We will not stay idle, and there are no taboos about how we will tackle this. We will look over our strategy, our perimeter and our image among investors.”
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