$BOL.FP: The Bollore Group consists of a large stake in Vivendi, which owns Universal Music Group, the world’s largest music label, a global freight forwarding business, a pan-African logistics business, a solid state battery business and assorted listed investments.

These are secularly growing businesses with good competitive positions. Vincent Bollore, the Carl Icahn of Europe, controls the group, which has returned 9x the index over the past 20 years. Nonetheless, the company trades at a 55% discount to a conservatively calculated NAV.

Bollore has a market value of 4.6bn Euros and its headquarters are in Paris.

We will describe the business, outline why the opportunity exists and describe what we think the business is worth.

Vivendi owns a collection of assets, but its main asset is UMG, the world’s largest music label and the home of global icons such Taylor Swift, Drake and Ariana Grande. Tencent bought 10% of UMG for $3bn in March 2020.

Music labels control vast catalogs of music and benefited tremendously from the rise of streaming. Streaming has led to mid-teens organic growth at UMG and we believe that streaming will continue to grow at healthy rates for many years.

In addition, Bollore owns transportation and logistics assets, including the largest network of ports in West Africa, a global freight forwarding business, an African logistics business and a European oil logistics business.

Global freight forwarding peer Kuehne + Nagel trade at 29x forward earnings while the African assets should growth at GDP+ rates for the foreseeable future.

The solid state battery business has proven itself through years of car sharing operation as no battery was replaced in Bollore’s cars over six years of heavy use in Paris.

Due to the characteristics of Bollore’s technology, the batteries will be used for shared transportation and energy storage rather than individual cars. Lastly, Bollore has a collection of smaller, legacy investments that the company plans to continue to monetize.

Despite long-term outperformance, Bollore has treaded water over the past five years due to three factors. First, the discount to NAV has increased markedly as conglomerates have fallen out of favor and value stocks have underperformed.

Second, Bollore has lost more than $1bn on the solid-state battery business over the past five years. Third, African trade volumes have been weak due to low commodity prices. We believe that these three problems will become tailwinds over the next five years.

Bollore has moved to simplify the group through selling non-core assets including Havas, WiFirst, French ports and >50% of the company’s Mediobanca stake. In our conversations, management has expressed a desire to continue the simplification process.

Second, Bollore has rationalized the solid-state battery business by closing car sharing and charging operations in Paris, London and the United States. The division’s cash burn continues to decrease and should be breakeven on a cash basis in 2021.

Most importantly, Bollore has secured a contract to supply its solid-state batteries on Daimler’s electric buses in Europe. This move validates Bollore’s technology.

We believe that Bollore will sell this division to a large battery manufacturer such as LG Chem or an OEM that wants to vertically integrate. Third, commodity prices drive African exports and economic activity.

Commodity prices move in long-cycles and should become a tailwind over the next five years after a long period of underperformance.

The shares currently trade at 3.34 (4.5bn market value) and are worth ~7.50. We value Vivendi at 3.6bn (market value net of group's debt), transportation and logistics at 5.7bn (11x normalized EBITA vs. much higher valuation for peers) and the battery operations at 500m.

The battery valuation is a fraction of invested capital and a discount to what we believe the asset will ultimately be worth). Lastly, we value other assets at 600m (listed value).

After a tough period, we expect the group to continue to create value as it surfs three main tailwinds: streaming music, battery vehicle adoption and greater economic activity in Africa.

The shares are available at a significant discount to intrinsic value and the Bollore family has purchased 50m since March 2020. Long $BOL.FP @chriswmayer @FrenchCMunger @GWInvestors