The fast-developing battle between Vivendi and one of its shareholders over the company’s cash policies and strategy has taken a new turn following a warning from Vivendi’s management that US activist hedge fund P. Schoenfeld Asset Management could be in breach of French law concerning a 20% threshold on action by foreign investors.
Under a law dating from 1986, non-EU investors are barred from joining forces in excess of a 20% threshold.
Schoenfeld had earlier tabled resolutions to be put to Vivendi shareholders calling for the company to increase the amount of cash to be returned to shareholders for the 2014 financial year and to reject compliance with France’s so-called Florange law, designed to protect employees in the case of takeovers. The hedge fund had earlier lobbied for the disposal or flotation of Universal Media Group, seen by Vivendi’s management as one of the two pillars of its media strategy, along with Canal+, and has argued that there are no meaningful synergies to owning TV and music assets.
Vivendi warned that shareholders found to be in breach of the law could be liable for indemnities amounting to between €5 billion and €9 billion.
In a letter addressed to the Vivendi management board, the hedge fund’s CEO Peter Schoenfeld said he was “disappointed” to have received Vivendi’s letter.
Noting that his company had informed Vivendi last year that it now owned over 0.5% of the French media giant’s stock, and that it had “not received any warning…at that time”, Schoenfeld continued:
“Now, as a result of our decision to propose two resolutions to shareholders, we have received a letter whose purpose seems to be to intimidate us. We consider this behaviour totally unacceptable. In addition, we wonder whether you are also attempting to intimidate other shareholders who are willing to support our resolutions.”
Schoenfeld said it was Vivendi’s duty to “monitor closely” any risks that could be triggered by the law. He also accused Vivendi of lack of transparency about the level of foreign ownership in the company and demanded that the company disclose all information it has in relation to the law, with respect to foreign ownership and historical monitoring of the 20% threshold.
Schoefeld also demanded to know if the letter delivered to it was also delivered to other foreign shareholders, with the same threat of legal action, and indicated that his hedge fund could issue a claim for damages over its “interference” in regard to its proposed resolutions and lack of diligence to ensure compliance with the law.
“We consider the speculations at the end of your letter, regarding our willingness to favour the acquisition of Vivendi assets by interested third parties to be libelous or at best, gratuitous. This is especially the case since you seem to have disclosed the content of your letter to the press. We also reserve our right to claim damages in this respect,” Schoenfeld said.
Schoenfeld has now reportedly upped the ante further by accusing Vivendi chairman Vincent Bolloré of benefiting from the alleged undervaluation of the company to increase his stake.
Bolloré last week increased his stake in the company from 8% to over 10%.