Vivendi Universal S.A. agreed last week to reduce its stake in its Vivendi Environment unit from 63 percent to about 40 percent, a move that could raise as much as $1.9 billion.
That money could go a long way toward reducing Vivendi's $32.07 billion debt load, a factor that has played a major role in the company's declining stock price.
Vivendi's stock is down about 52 percent since the beginning of the year.
In a press release last week, Vivendi Universal said that its board of directors has authorized the reduction in the Environment stake. The parent company would sell about 15 percent of the unit outright, and issue new shares worth as much as $1.4 billion, further diluting the parent company's holdings.
The transaction is to be completed when market conditions are appropriate and as soon as practicable, Vivendi said in the statement. The divestiture is "another important step toward [Vivendi's] board of directors' and management's stated objective to deleverage the company," it continued.
Vivendi also said Esther Koplowitz, director of Spanish construction giant Formento de Construcciones y Contratas (FCC) and a board member, agreed not to exercise her call options on her Vivendi Universal shares once the French media conglomerate reduces its stake in Vivendi Environment to less than 50 percent.
"This agreement reflects FCC's and Mrs. Koplowitz's continued confidence in the growth potential of Vivendi Environment and will deepen their productive partnership," Vivendi Universal said in the statement.
Investors initially cheered the move to reduce the stake in the water and energy utility, driving Vivendi Universal stock up $1.86, or 7 percent, to $28.51 last Monday. The stock retreated in subsequent trading, falling to $27.06 on June 19.
By reducing its stake in Vivendi Environment below 50 percent, Vivendi Universal complies with U.S. Generally Accepted Accounting Principles (GAAP) and will be able to separate VE's $13.5 billion in debt from its books. But it also means that Vivendi Universal will also lose the environmental unit's revenue and cash flow.
Vivendi Universal's debt load has been a major investor concern for months.
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