Nice analysis. I did something similar last year (with similar outcome), but one thing I struggled with are the cash positions.
Firstly, I am not certain that the the cash positions for the illiquid subsidiaries (cambodge, rouen etc) are not also consolidated into Bollore/Odet, so that you may be counting them twice in your analysis. But you probably have more financial understanding than me to determine if this is the case.
Secondly, it would be very interesting (needed, actually) to look at the cash positions of the other companies as well. Their annual reports must be available somewhere (at the French depository of company accounts?).
For instance, I found an annual report of Terres Rouges, which stated 291M€ net cash in 2021, and also indicated that Terres Rouges has a direct holding in Odet (size unspecified) which is not in your schedule.
Thanks for pointing out a likely mistake. On (1) I checked and the both Cambodge and Artois are consolidated in Bollore SE as per their financial reports, so I was indeed double-counting cash here and my resulting NAV was too high.
How good they just announced a deal which increases the buffer again :-)
On (2), I agree that it would be good to have reports for other entities like Terres Rouges. On the other hand, it is likely that Terres Rouges will also be consolidated as Bollore is even a majority owner. So if the likes of Cambodge are consolidated, I see no reason why Terres Rouges would not be.
Thanks for this excellent write-up. The group structure is indeed extremely complex and probably the main reason for the big discount to the net asset value. My guess is that the discount at the Bollore SE level is not even fully understood by the professional investment community.
While share buybacks are certainly value accreditive, they are not really helping in this regard. You made a fair point that collapsing some of the holding layers would be helpful to increase visibility.
But which of the layers could be eliminated without a loss of control and potentially negative tax consequences for the Bollore family?
And more importantly, what would be the potential tax consequences of such transactions for minority shareholders?
The spin-off of UMG for example was treated like a dividend distribution for French minority shareholders at the Vivendi level, while it was tax free for Bollore SE because it's holding was above 5% and therefore tax exempt. So interests seem not fully aligned here.
thanks for commenting. If you look at LT performance, Odet shareholders have done satisfactorily well despite the big discount still in place.
The buybacks do increase the holdings of the Bolloré family and may be a harbinger of a simplification of the structure. Bolloré SE is the listed company with the largest float so you may get the biggest bang for the buck in repurchasing here first.
I am no tax expert (and certainly not on French tax law), but I agree that any action taken will be structured in favour of the family which is one reason why I am invested in Odet, the entity closest to tje listed family office. I am personally fine to be invested alongside the family and do not need distributions on the way.
You're right! On the very long run Odet performed great/even better than Bollore.
I wonder if the Bollore family is at all interested in steamlining the holding structure. They could have bought out the fairly small percentage of minorities at the Odet level (~7%) for a couple of hundred millions already.
When you refer to the listed family office you mean Bollore Participation SE? What is their ultimate holding in Cie Odet/Bollore SE?
I really think Odet is their listed family office (Bollore Participations SE is unlisted). We saw in the UMG distribution that a lot of UMG ended up being held in Bollore SE. If the Bollore assets were distributed, most would end up in Odet.
Therefore, for the family it can make sense to reduce the free float in Bolloré prior to simplifying the structure to make sure you get a bigger piece of the pie. But you need money for that which they now have (after the sale of BAL)...
So, I am not claiming that I know their master plan, but in a way it does make some sense to me...
I think key is the holding of Bollore Participation SE. I watched their latest recorded annual meeting on their website. Bollore seems to be a great actor to me. Especially when he was asked about buybacks, discount to NAV and the change in the articles of incorporation...
- What do you think of the fairness opinion in the tender documents? They valued the circular ownership around 8b and came up with a NAV around 8 euros before holdco discount.
- Can't ODET squeeze out minority shareholders whenever they want?
Interesting. What I don't understand........ I checked the Tradingview Charts -> 1 Year
Vivendi: ~ -21
UMG: ~ -14
Bollore: ~ +20
ODET: ~ +33
So do I miss something here? The discount collapsed a lot the last year? As you hold ODET congrats to this decision. I would personally feel actually a bit late to the party.
Part of the outperformance in Bol/Odet was probably because of the closing of the sale of BAL. The deal took a year from signing to closing and may have looked uncertain in the choppy market environment.
Beyond that, I agree, the discount is smaller than it was, maybe also driven by the share repurchases at the Bolloré SE level which lifted Bol / Odet.
Hello Carsten,
Nice analysis. I did something similar last year (with similar outcome), but one thing I struggled with are the cash positions.
Firstly, I am not certain that the the cash positions for the illiquid subsidiaries (cambodge, rouen etc) are not also consolidated into Bollore/Odet, so that you may be counting them twice in your analysis. But you probably have more financial understanding than me to determine if this is the case.
Secondly, it would be very interesting (needed, actually) to look at the cash positions of the other companies as well. Their annual reports must be available somewhere (at the French depository of company accounts?).
For instance, I found an annual report of Terres Rouges, which stated 291M€ net cash in 2021, and also indicated that Terres Rouges has a direct holding in Odet (size unspecified) which is not in your schedule.
Bert,
Thanks for pointing out a likely mistake. On (1) I checked and the both Cambodge and Artois are consolidated in Bollore SE as per their financial reports, so I was indeed double-counting cash here and my resulting NAV was too high.
How good they just announced a deal which increases the buffer again :-)
On (2), I agree that it would be good to have reports for other entities like Terres Rouges. On the other hand, it is likely that Terres Rouges will also be consolidated as Bollore is even a majority owner. So if the likes of Cambodge are consolidated, I see no reason why Terres Rouges would not be.
Thanks again for commenting
Thanks for this excellent write-up. The group structure is indeed extremely complex and probably the main reason for the big discount to the net asset value. My guess is that the discount at the Bollore SE level is not even fully understood by the professional investment community.
While share buybacks are certainly value accreditive, they are not really helping in this regard. You made a fair point that collapsing some of the holding layers would be helpful to increase visibility.
But which of the layers could be eliminated without a loss of control and potentially negative tax consequences for the Bollore family?
And more importantly, what would be the potential tax consequences of such transactions for minority shareholders?
The spin-off of UMG for example was treated like a dividend distribution for French minority shareholders at the Vivendi level, while it was tax free for Bollore SE because it's holding was above 5% and therefore tax exempt. So interests seem not fully aligned here.
Dear Fitileh,
thanks for commenting. If you look at LT performance, Odet shareholders have done satisfactorily well despite the big discount still in place.
The buybacks do increase the holdings of the Bolloré family and may be a harbinger of a simplification of the structure. Bolloré SE is the listed company with the largest float so you may get the biggest bang for the buck in repurchasing here first.
I am no tax expert (and certainly not on French tax law), but I agree that any action taken will be structured in favour of the family which is one reason why I am invested in Odet, the entity closest to tje listed family office. I am personally fine to be invested alongside the family and do not need distributions on the way.
You're right! On the very long run Odet performed great/even better than Bollore.
I wonder if the Bollore family is at all interested in steamlining the holding structure. They could have bought out the fairly small percentage of minorities at the Odet level (~7%) for a couple of hundred millions already.
When you refer to the listed family office you mean Bollore Participation SE? What is their ultimate holding in Cie Odet/Bollore SE?
I really think Odet is their listed family office (Bollore Participations SE is unlisted). We saw in the UMG distribution that a lot of UMG ended up being held in Bollore SE. If the Bollore assets were distributed, most would end up in Odet.
Therefore, for the family it can make sense to reduce the free float in Bolloré prior to simplifying the structure to make sure you get a bigger piece of the pie. But you need money for that which they now have (after the sale of BAL)...
So, I am not claiming that I know their master plan, but in a way it does make some sense to me...
I think key is the holding of Bollore Participation SE. I watched their latest recorded annual meeting on their website. Bollore seems to be a great actor to me. Especially when he was asked about buybacks, discount to NAV and the change in the articles of incorporation...
https://finance.yahoo.com/news/french-tycoons-enter-talks-5-141350629.html
Great article ! Everyone (including me) is waiting for the galaxy simplification. Who know when it will happen...
Great work. Two questions:
- What do you think of the fairness opinion in the tender documents? They valued the circular ownership around 8b and came up with a NAV around 8 euros before holdco discount.
- Can't ODET squeeze out minority shareholders whenever they want?
Interesting. What I don't understand........ I checked the Tradingview Charts -> 1 Year
Vivendi: ~ -21
UMG: ~ -14
Bollore: ~ +20
ODET: ~ +33
So do I miss something here? The discount collapsed a lot the last year? As you hold ODET congrats to this decision. I would personally feel actually a bit late to the party.
Part of the outperformance in Bol/Odet was probably because of the closing of the sale of BAL. The deal took a year from signing to closing and may have looked uncertain in the choppy market environment.
Beyond that, I agree, the discount is smaller than it was, maybe also driven by the share repurchases at the Bolloré SE level which lifted Bol / Odet.