PARIS (The Deal) -- France's Vivendi (VIVHY) has urged shareholders to reject activist investor P. Schoenfeld Asset Management's call to distribute €9 billion ($9.9 billion) of cash, claiming that it would be "an act of mismanagement" that would open it to litigation.

New York-based PSAM, which owns 0.8% of Vivendi, has tabled resolution for Vivendi's annual shareholders' meeting, claiming that cash on the French company's balance sheet has weighed on Vivendi's share price, leading it to underperform its peers.

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"Excess cash... is distorting the potential returns for investors," the fund said in a statement. "PSAM estimates investors could realize upside up to 38%" if Vivendi distributed that cash to shareholders.

The activist investor also renewed calls for Vivendi to consider selling either, or both, Universal Music Group and its pay-TV operation Groupe Canal+, claiming the operations would be worth more to strategic buyers. That suggestion, which was included in a strategy paper sent to Vivendi last year, is not part of the fund manager's resolution.

"They sent a request to spin-off or sell UMG in November and we rejected it," said a Vivendi spokesman. "Then we got these new requests saying that they wanted more money. This is a clash between a short-term financial strategy and our long-term plan to build a global media champion."

The shareholder vote on the PSAM motion will be the first significant test of support for the strategy put in place by Vivendi's chairman and largest shareholder Vincent Bolloré.

The French entrepreneur used his 5% stake to install himself as chairman in 2013, before pushing through Vivendi's transformation from a telecom-led conglomerate into a pure-play media group by selling about €28 billion of assets including mobile and fixed line operators in France, Brazil and North Africa.

Those sales left Vivendi with €4.6 billion of net cash on its books at the end of 2014 and allowed it to cut net debt to about €11 billion, down from €17.4 billion two years earlier.

PSAM's head Peter Schoenfeld said on Tuesday he will meet with other shareholders to rally support for his proposals. They include a €2.8 billion dividend paid from 2014 profit, and a further €6.1 billion special dividend paid out of cash accrued directly and indirectly from Vivendi's recent asset sales.

Vivendi, which has already announced plans to distribute as much as €5.7 billion over three years, said PSAM's plan would weaken its balance sheet, endanger its long-term strategy and was probably illegal.

"The management board believes that this proposed resolution would not be in the public interest and could be construed as an act of mismanagement that, if in the unlikely event it were approved, could lead to lengthy litigation, notably in terms of abuse of power," said Vivendi.

The French company has also categorically ruled out selling either UMG or Canal+. Earlier this month Vivendi CEO Arnaud de Puyfontaine told analysts that UMG would be sold "over his dead body."

Vivendi currently plans to distribute about €3 billion to shareholders through a €1 dividend over three years. A further €2.7 billion could be returned to shareholders through a share buyback at a maximum price of €20 per share. That buyback currently looks unlikely as Vivendi shares are trading at about 10% above the proposed price.

Vivendi' shareholders will vote on the PSAM motion at the meeting on April 17. They will also be asked to vote on a proposal from French ethical investment group PhiTrust Active Investors to suspend the double voting rights of long-term shareholders. Vivendi asked shareholders to vote against that motion.

PSAM is taking legal advice from Willkie Farr & Gallagher.

Shares in Vivendi traded Wednesday at €23.06, marginally higher than their Tuesday close of €23.05.

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