French billionaire and Vivendi chairman Vincent Bollore is both buyer and seller in the transaction, which was announced late Thursday. Vivendi will initially pay €2.3 billion for Bollore's 60% stake in Havas before the bid is extended to the rest of Havas' shareholders.
What isn't so easy to see is how Vivendi, which is 20% owned by Bollore, benefits from cobbling its pay-TV and music operations, each of which account for about half of its earnings, to a second-tier (in revenue terms) advertising and communications firm.
Vivendi's statements offer little insight. "This strategic transaction will allow Vivendi to accelerate its building of a leading world-class content, media and communications group and will ensure the newly created group a unique positioning in an environment in which content, distribution and communications are converging," the company waffled.
There was no talk of cost savings (perhaps because there are none), or even the less-tangible synergies that are typically touted in such deals. Vivendi said Havas' valuation, which is about 10.6 times earnings, was a "price consistent with industry multiples," and claimed the deal will add about 100 basis points to margins but provided no details.
Vivendi investors deserve a more concrete rational and more information on the benefits.
The offer may be in line with industry norms, but at €9.25 per Havas share, it is pitched at an all-time high for the French advertising group's stock. It also represents an 20.6% premium to its weighted average share price over the past year, a price that had already factored in a widely expected bid from Vivendi.
Bollore, it should also be remembered, paid stock for the bulk of his stake in Havas, meaning that he is effectively cashing out a noncash investment.
If that is a concern to some Vivendi shareholders there isn't much they can do about it. By using cash to fund the deal Vivendi avoids the necessity of putting the takeover to a shareholder vote.
For all the vague benefits of the deal, there is a very concrete cost for Vivendi's prospects. The use of Vivendi's cash strips the Paris-based company of firepower that might otherwise have been used to more directly pursue it's stated aim of becoming a southern European content and media giant. That goal has either way looked increasingly distant in recent months after the French company's expansion into Italy, via a €2 billion raid on Mediaset, has become bogged down in litigation.
The acquisition of Havas isn't Bollore's only mystifying, and largely unexplained, deal since he installed himself as head of Vivendi. An about €4 billion acquisition of a 24.9% stake in Telecom Italia was flippantly justified as "opportunistic." The rational for the purchase of French video game maker Gameloft SE for a half-billion euros, and the stalking of another games maker, Ubisoft, are also yet to prove their worth.
Bollore's reputation as a canny CEO and corporate raider have afforded him considerable leeway to pursue his whimsical deals. Investors gave him the benefit of the doubt once again on Friday, as Vivendi shares climbed to €19.38, up €1, or 5.4%, in the wake of the Havas announcement.
Such credit won't be unending. Pressure will grow on Bollore to prove his acquisitions can coalesce into the media titan he has long promised, and are not simply self-serving.