Vivendi floats off environmental business
French media, telecoms and utilities group Vivendi has announced it is to effect a partial demerger of its utilities arm Vivendi Environment next month by listing 30-35% of its shares for an estimated 35 to 40 euros per share.
Vivendi chairman Jean-Marie Messier also confirmed earlier press reports that he had rejected an E30 billion cash offer from German energy giant RWE to buy Vivendi Environment, scotching industry rumours that the partial flotation was a preliminary step towards a sale.
‘Is it true a company came to see me to propose a cheque for 30 billion euros ($28.25 billion) cash for Vivendi Environment … on April 12? Yes. Is it true that I didn’t even consider this cheque for 30 billion euros for a second? Yes,’ he told a news conference.
Vivendi Environment is the world’s leading provider of waste and water treatment, transport and energy services. Chairman Henri Proglio informed the news conference that the initial public offering would be exclusively through cash from the market, with the target price range between 35 and 40 euros. Between 30% and 35% will be offered to the market, with Vivendi retaining the rest.
Proglio said Vivendi expected to make about four billion euros from the initial public offering, which opened this week. The price for the shares will be fixed on 11 July, with trading on the Paris stock market commencing the next day.
Proglio said the exchange of Vivendi convertible bonds -issued in April 1999 to pay for the acquisition of US water treatment company US Filter – for shares in Vivendi Environment could bring the company another E800 million.
The partial flotation will increase Vivendi Environment’s share equity to over E5 billion euros from E412 million and cut its debt from E16.8 billion to below E12 billion.
The City has viewed the partial flotation as Vivendi’s opening gambit towards completely shedding the traditional utilities business to concentrate on its media empire, Vivendi Communications. Williams de Broe utilities analyst Nigel Hawkins told edie: ‘Vivendi has said for some time it was going to effect a demerger. But it does raise question marks about some of the water holdings in the UK.’ With regard to the rumours that Vivendi had been in discussions with RWE about selling its environmental arm he said: ‘I’m sure they have had discussions with many a person.’
He feels that the Veba-Viag energy merger in Germany may have played a part in scotching the deal, forcing RWE to concentrate on winning business in its home market. ‘Certainly its aggressive expansion overseas by 2009 looks more and more unlikely,’ he said.
M. Messier emphasised that Vivendi Environment, which holds Vivendi’s entire debt of E16.776 billion, was not Vivendi Communication’s ‘ugly sister’. He reiterated that he has no plans to wholly sell off Vivendi Environment. ‘Utilities is one of Vivendi’s two major businesses and it will stay that way,’ he told the news conference last Friday.
Vivendi Environment, which has an operating profit of E1.7 billion, employs 180,000 people in four main businesses: water supply and treatment as Vivendi Water, Onyx waste collection and treatment, the badly-performing Connex road and rail transport and Dalkia energy services.
M. Proglio said these four businesses all had strong prospects for growth because of the introduction of stricter environmental standards, deregulation of traditionally state-run services and the trend for companies to require operators who could provide for all their utility needs.
He said Vivendi Environment had seen turnover double in the last five years to E23.2 billion and net profit triple. M. Messier added that Vivendi did not plan to sell any more shares in Vivendi Environment before 2003. But he said if a future major transaction required another capital increase or share swap, the company might agree to dilute its stake.