By Sam Schechner
PARIS--After a year of setbacks, French conglomerate Vivendi SA
(VIV.FR) is nearing a pair of key turning points in its effort to
pay down towering debt and refashion itself as a smaller--and more
handsomely valued--media company. At a board meeting on Monday,
Vivendi will discuss plans aimed at extracting $3 billion from its
cash-rich Activision Blizzard (ATVI) videogame subsidiary through a
special dividend, according to people familiar with the matter. The
Vivendi board may push to have the California-based unit approve
the dividend at its own board meeting later this week, these people
said.
At the same time, Vivendi's board will also discuss advancing
negotiations to sell its controlling stake in African phone
operator Maroc Telecom (IAM.CL) for about $5.5 billion, plus debt,
to Emirates Telecommunications Corp. (ETISALAT.AD), some of those
people and others said. Those deals--if pulled off--would put
Vivendi in a position to begin a much-bigger transformation pushed
by the company's 74-year-old chairman, Jean-Rene Fourtou: A plan to
spin off French phone operator SFR, Vivendi's biggest unit by
revenue.
Slashing Vivendi's EUR13.2 billion in net debt is a key step in
Mr. Fourtou's plan, because without SFR, the remaining pieces of
Vivendi could not shoulder such a burden. The result of such a
deal, which some people close to the company say could happen by
fall 2014, would be a smaller Vivendi, built around media
businesses, such as Universal Music Group and French pay-TV company
Canal Plus.
But should the deals fall through--which remains
possible--pressure would mount on Mr. Fourtou, who has promised
change and "no taboos" for over a year, but so far not pulled off
any big asset sales. At Activision Blizzard, one option under
consideration is for Vivendi--which controls a majority of the
seats on the videogame company's board--to vote for a dividend of
over $3 billion from its subsidiary, some of the people familiar
with the matter said. Given Vivendi's 60% stake in Activision
Blizzard, such a dividend would pay Vivendi roughly $2 billion.
Activision Blizzard would have to raise debt to fund such a
dividend, because it does not have enough cash in the U.S. to pay
it, the people familiar with the matter said. Activision Blizzard
had $4.3 billion in cash and cash equivalents at the end of March,
but $2.7 billion of that cash is held offshore, and would be hit
with U.S. taxes if repatriated, according to company filings. The
proposed dividend isn't a slam dunk. Some people familiar with the
matter said the cash payout was not the preferred option of
Activision Blizzard management and Chief Executive Bobby Kotick,
who has tried to use Activision's cash pile to buy out Vivendi.
But other people close to Vivendi said there was no disagreement
on the dividend idea--although no decision has yet been made on
whether to pull the trigger. A spokeswoman for Activision and a
spokesman for Vivendi declined to comment. Meanwhile, Vivendi is
inching closer to entering exclusive negotiations with Emirates
Telecommunications, or Etisalat, on a deal for the Abu Dhabi-based
operator to buy Vivendi's 53% stake in Maroc Telecom for roughly
$5.5 billion, plus the assumption of debt, according to people
familiar with the matter. Though Etisalat is the only remaining
company to have submitted an official bid, Vivendi's approval of
that offer has been bogged down, the people familiar with the
matter said, in lengthy discussions with the government of
Morocco--which owns a 30% blocking stake in Maroc Telecom. Etisalat
has sought assurances that it won't be responsible for more than
EUR1 billion of potential future tax liabilities in Morocco,
according to a person familiar with the matter.
Meanwhile, the government has sought to boost the local stake by
encouraging the entry of a state-owned bank, another person
familiar with the matter said. Negotiations over those terms are
now closing in on resolution, both of the people said. "We will
wait for their board meeting and to hear what they say," said
Etisalat CEO Ahmad Julfar, who declined to comment on price, or
reasons for delay. Representatives of the Moroccan finance ministry
did not immediately respond to requests for comment. Vivendi's Mr.
Fourtou has been looking to reshape the Paris-based company since
spring of 2012, when the arrival of a fourth mobile phone operator
in France led to a profit warning at SFR that tanked Vivendi's
stock. But no one was interested in buying Activision Blizzard last
summer at the price Vivendi wanted. Ditto for Brazilian phone
operator GVT.
-Rory Jones contributed to this article.
Write to Sam Schechner at Sam.Schechner@wsj.com