The owner of Universal Music Group, Canal+ and Telecom Italia announced late last week that it is intending to buy Bolloré Group’s 60% stake in Havas for €2.3bn.
The enlarged Vivendi/Havas group, spanning advertising, media content and entertainment, would be worth almost €28bn. This would make it bigger than WPP, which is worth about €26bn.
The deal has been anticipated for years, with Bolloré Group, which is led by Vincent Bolloré (pictured, left), owning 20% of Vivendi (of which he is also chairman) and 60% of Havas. Speculation intensified in March when his son, Havas chief executive Yannick Bolloré (pictured, right), merged Havas’ media and creative divisions.
Subject to due diligence, the acquisition is expected to complete by the end of June or beginning of July.
Observers said Vivendi may have calculated that the regulatory environment would be favourable in France following the election of Emmanuel Macron, a friend of Yannick Bolloré’s, as president. Havas said the timing is coincidental.
In a statement, Havas said the rationale for the merger was the complementary services they could share: "It would enable Havas to leverage Vivendi’s skills in talent management, content creation and distribution. Vivendi will gain access to Havas’ expertise in consumer science, data analytics and new creative formats."
Havas confirmed that Vivendi’s purchase of Bolloré Group’s stake will not affect when staff become entitled to receive shares as part of their long-term bonus scheme. Havas staff are in line for up to 7.2 million shares – potentially worth €66.7m – over the next four years, according to the company’s annual report.
Industry reaction
Most analysts and industry insiders interpret the deal as a positive move for Havas.
Adam & Eve/DDB co-founder James Murphy said: "This has the potential to give Havas a boost – new energy and a bigger range of services to draw on."
Sarah Golding, chief executive of CHI & Partners, agreed: "Apart from the cultural connection, this deal makes a lot of sense. It should give them access to strong talent relationships, as well as skilled content creation and distribution networks. With branded entertainment being a growing feature of the advertising landscape, Havas should be well-placed to play in that space."
For potential clients, the deal could mark a change in how agencies are structured. "The ad industry has been slow to lean into new forms of content and experiences that brands can exploit," Airbnb chief marketing officer Jonathan Mildenhall said. "I am excited about this type of acquisition because it creates progressive forms of creative collaboration. Consumers don’t think of brand engagement in the same silos that the industry has created. Moves like this will help all stakeholders realise the bleeding-edge potential of marketing."
Impartiality issues
Commentators have said Havas needs to address how its media services can remain impartial when it effectively has its own media platforms.
Yannick Bolloré told ±±¾©Èü³µpk10: "There is, by nature, a conflict of interests between media buying and selling, which is why the two activities must be kept separate. Advertising represents a very small share of Vivendi’s revenue. It would be very foolish for Havas to favour Vivendi as it would raise a trust issue with our clients and partners."
French transparency regulation "obliges companies like us to publicly disclose all our investments and looking at these figures reveals that there has been no favouritism over the past years", he added.
Other media and entertainment companies have moved into marketing services. William Morris Endeavor took a 49% stake in Droga5 in 2013. More recently, Hearst bought iCrossing and News Corp acquired Unruly Media.
And with the joint threat to agencies from management consultancies (Accenture purchased Karmarama last year) and big tech companies that may lure brands’ marketing spend directly, further consolidation of this type is likely.
Havas
Owns: Havas Worldwide, Havas Media, Arena Media, All Response Media, Field Day, BETC, Havas SE Cake, Fullsix Group, Maitland
Employees: 20,000
Profit margin: 14.5%
Number of territories: 100 countries
Finances: €2.3bn sales and €329m income from operations in 2016. Havas’ full-year revenue growth slowed to 3.3% in 2016 versus revenue growth of 17.3% in 2015
Worth: The deal values Havas at €3.9bn
Vivendi
Owns: Canal+, Universal Music Group, Telecom Italia, Dailymotion, Gameloft
Profit margin: 7.9%
Employees: 22,600
Number of territories: 60 countries
Finances: €10.8bn sales and €853m income from operations in 2016
Worth: €24bn
Details taken from investor presentation
The Vivendi/Havas Deal
€2.3bn Price Vivendi is paying for Bolloré Group’s 60% stake in Havas
€9.25 Amount Vivendi is offering per share
€28bn Total value of Vivendi/Havas group – more than WPP’s value of €26bn
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