|Shares Out. (in M):||7||P/E||0||0|
|Market Cap (in $M):||6,784||P/FCF||8||0|
|Net Debt (in $M):||318||EBIT||0||0|
Financière de l’Odet “ODET” is the publicly traded holdco solely owning Bolloré SA “BOL” shares (a 64% stake). BOL itself returned 20X in 20 years. Perhaps I will submit a detailed write-up on Bolloré later. I believe ODET is the more interesting of the two, because it trades at an additional “compound” discount layer to BOL, and maximizes alignment with the Bolloré family in
I’ve read quite a few analyses on BOL, with somewhat general arguments of “simplification” as a catalyst. This write-up will dig deeper what kind of simplification I believe is likely next, and why. Note that in my write-up scenario, while BOL will most likely benefit as well as its 50-60% discount to NAV closes in a simplification of the complex structure, ODET is the best long because of a compound discount tightening on top. The 50-60% NAV BOL discount is basically consensus among many buy-side and sell-side notes and my recent analysis.
I believe French regulation can act as a catalyst for a large event-driven return for ODET holders. This probably happens before the 300-year anniversary of Bolloré when Vincent Bolloré steps down. Vincent would be the first to provide us the remaining time until February 17, 2022, as he wears a dedicated countdown watch for that event (as Cuyler forgot to mention, a few months before the LNKD sale, R. Hoffman was famously wearing two watches as well). I quote from the French documentary “Complément d’enquête” on Youtube: “there’s much work left to be done [before passing the reign in ‘22], but I’m not in a hurry”.
Warning: No guaranteed return on invested brain damage. Honestly, I enjoy these structures and any further recommendations are welcome.
Bolloré is a holding that I’ve been tracking for a long time. In fact, when the excellent Muddy Waters report came out in ‘15 it was good to find matching values on the indirect circular self-ownership. Those numbers have since evolved: Mr. Bolloré has used some of the previously >60% circular ownership to buy out Havas shareholders a few years back. Today, the circular ownership stands at only 53.5% (this interestingly matches approx. the BOL NAV discount). As this circular ownership is apparently assigned zero value, this transaction has “created value out of thin air” as far as Mr. Market is concerned.
My variant view on BOL and ODET is driven by the Florange law that the Hollande administration passed in April 2014. This law grants shareholders in French companies double voting rights “VR” on their shares if they hold on to their shares for 2+ years. This law supposedly helps actors like Bolloré and the French state foster long-term shareholder value. Indeed, it has helped Bolloré SA with its Vivendi activism.
Shareholders that held on to French shares from the moment the law was passed thus got double VR’s in April 2016. BOL and ODET are obliged to publish (varying) total VR’s monthly and from these disclosures it can be deduced that only 14% of public shareholders of BOL (3% for ODET) was long-term (i.e. got double VR’s). Despite the French FTT (those 30 b.p. you’ll see on your brokerage statement) and the Florange Law, it seems public markets still disappoint central planners. This write-up - intended for long-term investors, of course – will do its fair share toward Hollande utopia.
I digress, but not much, as the raison-d’être of the ODET holding for Vincent Bolloré is retaining absolute control over BOL. For an introduction as to why circular structures are useful for control I recommend the Muddy Waters report on BOL. We can observe how ODET has historically functioned as a vital link to retain absolute control in BOL in the below figure “current situation”.
1 Current situation. Simplified figure for illustrative purposes.
As I will show, the Florange law (combined with high turnover in public markets) has rendered ODET useless as of recently: if ODET were to launch a share-for-share take-out offer on BOL minorities to collapse the two holdings into one NEWCO, both my pro-forma “worst case” and “best case” simulations show that the Bolloré family would retain >50% voting control (through “Sofibol”) as of recently.
Why would the takeover not be launched by BOL on ODET? Because the family holds BOL through ODET and would get new BOL shares in return. Therefore, they would lose double voting rights and get <50% voting control. Conclusion: in an ODET-BOL merger, BOL will not buy ODET, but ODET will buy BOL and will probably change its name (not Vincent’s wife, but rather an obscure river in Britany) into the target’s name.
Before I discuss the merger, I’ll give an overview of previous simplifications of the complex Bolloré.
As strange as it sounds, the structure used to be much more complex in the past:
*Both “branched” debt and stakes significantly complicated the calculation of per share NAV, so the above are major simplifications.
Absorption of "interco's" & asset swaps
See Bolloré’s real ownership structure for the below mentioned company names:
2006 - Merger of Bolloré Investissements with BOL (previous holding that sat in between FdlO & BOL)
2010 - Transfer of ownership of Fin. du Perguet (owner of Mediobanca) from ODET to BOL. Saga delisting
2012 - Merger-absorption of Financière du Loch (previous owner was FdlO)
2013 - Delisting & absorption of Plantations des Terres Rouges
2013 - Sofibol (private ODET parent) transforms into partnership status with unlimited liability
2014 - Sale of SAFA in exchange for shares in Socfinaf
2016 - Interco’s Fin. Artois and Compagnie du Cambodge sell out BOL stakes to HAV minorities (see later in Management compensation and share count)
Businesses that have been sold
Sale of shipping business ('06)
Sale of paper business ('09)
In short, Vincent’s kids will inherit the ownership and management of BOL and I believe further (guided) simplification will happen before 2022.
I believe that in a merger scenario, there are basically two lines of reasoning that will be applied by Mr. Bolloré’s bankers to determine a fair share-for-share offer to BOL minorities (the 36% float, with the balance being held by ODET itself):
Before we walk through the math, I’ll quickly recap the current situation (economic stakes). ODET owns 64% of BOL, and BOL owns two stakes in ODET: 36% directly (loop 1 in figure), and 88%*55% indirectly (loop 2 in figure). Reality is a bit messier with many private holdcos in between Sofibol and the Bolloré family. In the second figure, I demonstrate why I use 88% and 12% economic stakes of BOL and the family respectively in Sofibol. For this exercise, we must remember 88% of Sofibol is economically held by BOL, while the Bolloré family retains absolute control over Sofibol because of the complex pyramid structure that I omitted in my pictures.
2 Current structure (economic ownerships rounded). 1.6% of share capital BOL treasury shares counted in “BOL public minorities” for sake of simplicity (but properly accounted for in my pro-forma simulation).