NEW YORK (TheDeal) -- France's Vivendi SA is preparing for a tussle with P. Schoenfeld Asset Management LP, a New York-based activist investor that asked the French company to sell its music operations and is expected to push for more cash to be returned to shareholders.
Paris-based Vivendi said that it had rejected a December request from the fund, known as PSAM, to sell Universal Music Group and that it had no intention of increasing the €5.7 billion ($6.2 billion) it has earmarked for distribution to its investors over the next two years.
"Arnaud de Puyfontaine, Chairman of the Management Board, has made it clear on several occasions, and notably at a conference in London on 17th March, that UMG is not for sale and, along with Canal+ Group, constitute the strategic pillars in the building of a major industrial media and content group," the company said on Monday.
Universal Music, which counts Taylor Swift and Kanye West among its hundreds of artists, has sales of about €4.6 billion a year and is the world's biggest music-label operator and music publishing group. Canal+ is the company's French pay-TV channel.
PSAM has hired advisers in New York and Paris and is preparing to submit resolutions asking Vivendi to take actions that the activist fund believes will boost the company's share price, according to a report in the Financial Times. The core of that request is likely to be a demand for Vivendi to return more cash to shareholders. Vivendi's plans right now include a proposed €1-per-share dividend and a €2.7 billion share buyback which may never happen since Vivendi has said it will only buy back those shares at a maximum €20 per share. That's 10% below the company's current share price.
Shares in Vivendi have gained 13.6% over the past year, lagging France's key CAC 40 index, which has climbed 16.4% over the same period.
Vivendi had €4.6 billion of net cash on its books at the end of 2014 and had cut net debt to about €11 billion, down from €17.4 billion two years earlier, through the sale of about €28 billion of assets, mostly in telecommunications, last year.
Vivendi's biggest shareholder and chairman, Vincent Bolloré, wants to use that cash to build Vivendi's media operations through acquisitions and expansion of existing operations.
"Vivendi wishes to stress that the majority of shareholders met recently are satisfied with the medium-term strategy enabling the group to create value through an ambitious internal and external development plan," the company said.
PSAM could not immediately be reached for comment. The hedge fund owns less than 1% of Vivendi's capital, according to the French company.
Shares in Vivendi traded Monday at €22.33, up €0.18, or just under 1%, from their Friday close. The company has a market capitalization of €30.22 billion.