PARIS (Reuters) -Shares in Vivendi (EPA:VIV) surged on Thursday after the French media giant said it would examine splitting up into several entities, each of which would be listed on the stock market.
Vivendi shares were up about 8% in late morning trading, with gains adding hundreds of millions of euros to its market value.
The French group said the businesses that could be spun off included its TV unit Canal Plus, advertising arm Havas - taken private by Vivendi in 2017 - and an investment company holding its stake in French publisher and retailer Lagardere.
Vivendi said the break-up plans aim to boost the valuation of the spun-off units and narrow the discount at which the market values the combined group, which analysts at JPMorgan (NYSE:JPM) estimate at around 50% to Vivendi's sum-of-the-parts valuation.
The move could also open up M&A opportunities for Vivendi's units, the analysts argued, flagging Havas as an attractive acquisition target.
In October, Vivendi reported a rise in its third quarter revenue, driven by growth at Canal Plus and Havas.
Shares in Bollore, the holding company of French billionaire Vincent Bollore which is Vivendi's biggest shareholder, rose 3.1%.
"The proposal unlocks value while at the same time making it easier ... for Bollore to increase its stakes in the operating assets ... at some point in the future," said the JPMorgan analysts, who expect the split process to take up to a year.
"It also means that Bollore does not need to pay a premium for non-operating assets that it does not see as strategic," they added.
The plans come two years after Vivendi spun off its majority stake in Universal Music Group (AS:UMG) and distributed it among its shareholders as a special dividend. The company has traded at a significant discount since, according to analysts at UBS.
Other European conglomerates are exploring spin-offs as a way to unlock trapped value. Belgian chemicals group Solvay (EBR:SOLB) completed the spin-off of its Syensqo business earlier this week, while German drugmaker Bayer (ETR:BAYGN) has said it is considering a break-up of its consumer health or crop science divisions.
"Usually break-ups create value, so I understand the market reaction, especially because after the sale of the logistics part at Bollore level they have a lot of cash and have to decide how to use it," said Angelo Meda, portfolio manager at Banor SIM in Milan, on the back of Vivendi's plans.
($1 = 0.9176 euros)