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SoftBank $8.5 Billion Universal Bid Said Rejected by Vivendi (2)

July 19, 2013

SoftBank $8.5 Billion Universal Bid Said Rejected by Vivendi

The offer for Universal comes as Vivendi re-evaluates its structure amid sluggish share performance and tough competition in the French mobile-phone services market. Photograph: Kiyoshi Ota/Bloomberg

SoftBank Corp. (9984) made an $8.5 billion bid for Vivendi SA (VIV)’s Universal Music Group that was rejected by the French media company earlier this year, according to people with knowledge of the proposal.

Directors at Paris-based Vivendi turned down SoftBank shortly after the inquiry was made, said the people, who asked not to be identified because board deliberations are private. A deal would have handed the world’s biggest record company to the Tokyo-based carrier that founder and billionaire Masayoshi Son wants to turn into the world’s largest mobile operator.

SoftBank, which had its credit rating cut to junk yesterday after completing its $21.6 billion acquisition of a controlling stake in Sprint Corp. (S:US), is pursuing deals outside its home market to tap faster growth. At the same time, the music industry is rebounding from slumping sales of physical albums as more consumers sign up to services like Spotify and Pandora.

Japan’s third-ranked wireless carrier may be seeking to cut its reliance on services like Apple Inc.’s iTunes with its own music, said Tomoaki Kawasaki, an analyst at Iwai Cosmo Holdings Inc. (8707) in Tokyo. Universal’s stable of artists includes Lady Gaga, Justin Bieber, and Kanye West.

“SoftBank is an Internet communications company, so it’s also making money from content,” Kawasaki said. “The attempt to buy the music business is part of that. It was unfortunate it didn’t work out this time, but Son should have something up his sleeve, even with the downgrade.”

Vivendi gained 1.2 percent to 15.40 euros at 10:06 a.m. in Paris. SoftBank fell 0.3 percent to close at 6,430 yen in Tokyo.

Vivendi Restructuring

Mitsuhiro Kurano, a Tokyo-based SoftBank spokesman, declined to comment, as did Jean-Louis Erneux, a spokesman for Vivendi. SoftBank’s interest in Universal Music was reported yesterday by the Financial Times.

The offer for Universal comes as Vivendi re-evaluates its structure amid sluggish share performance and tough competition in the French mobile-phone services market. The company, which also controls game-maker Activision Blizzard Inc. (ATVI:US), has said it will focus on content production, and has sought buyers for some of its telecommunications assets.

Morocco’s Caisse de Depot et de Gestion investment fund may join Emirates Telecommunications Corp. (ETISALAT) in a bid for Maroc Telecom SA, which Vivendi is trying to sell, local newspaper L’Economiste reported today.

Music Bundles

A deal for Universal could have allowed Softbank to bundle music with mobile subscriptions, providing a new option among the growing range of digital music options. Sony Corp., which owns the world’s second-largest label, last month expanded the features of its Music Unlimited streaming application for iPhone users, while Apple is releasing a similar service.

Softbank’s credit rating was cut yesterday by Moody’s Investors Service to Ba1, the highest non-investment grade, from Baa3 in the wake of the Sprint deal, which gave the Japanese carrier control of the third-largest U.S. mobile operator. The downgrade makes a potential acquisition more difficult, said Yoshihiro Nakatani, a senior fund manager at Asahi Life Asset Management Co. in Tokyo.

A lower credit rating indicates a higher risk of a default and can raise borrowing costs.

“Still, there’s a possibility remaining for SoftBank to look for more acquisitions or growth opportunities if they get some discretion” from lenders, Nakatani said. “SoftBank is still on track for growth.”

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net; Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Nick Turner at nturner7@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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