Vivendi has lost a class-action lawsuit in the United States over misleading financial information during the $46bn three-way merger with Seagram and Canal Plus a decade ago. The case highlights the high risk of relying on financial information when concluding complex mergers.
The media, entertainment and telecoms group is appealing the decision.
Investors sent Vivendi shares down 4 per cent on the morning of Monday 1 February, when the news broke. It hit its lowest value since August.
Analysts at brokerage CM-CIC Securities said in a note: ‘This verdict imposes a “sword of Damocles” of a possible, though unlikely, worst-case scenario of 6.6 bn euros ($9.3 bn) in damages. (It also) restrains the group's financial room for maneuver at a moment where external growth is central to its strategy," Reuters reported.
Vivendi's strategy has been heavily based on acquisitions to bolster its media and telecoms activities, including a recent take-over of Brazilian group GVT.
Two of Vivendi's key financial commitments are distributing a strong dividend and retaining a BBB rating on its debt. Analysts said Vivendi was not likely to change those two key promises when it announces full-year earnings on March 1.
Despite the huge losses from almost sole reliance on financial information in the accounting scandals, repeated failed mergers and the banking collapses, supplementing such information with business intelligence and other analysis is still the exception (see Editor’s blog of blogs, home page).