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Note 3. Discontinued operations
Recognition of 20% interest in Numericable-SFR
On November 27, 2014, Vivendi sold 100% of its interest in SFR
to Numericable and received €13.166 billion in cash as well as
97,387,845 shares in the new combined entity Numericable-SFR,
which represents a 20% interest and voting rights. Since that date,
Vivendi deconsolidated SFR. Given the significant restrictive nature of
the commitments given by Vivendi and Numericable-SFR to the French
Competition Authority with respect to all Numericable-SFR’s operations,
Vivendi’s minority representation on Numericable-SFR’s Board of Directors
together with the other specific rights granted to Vivendi by Numericable-
SFR’s governance (see above) helps Vivendi adequately protect its
proprietary interests as a minority shareholder. Vivendi considers that
it does not have the right to participate in Numericable-SFR’s financial
and operational policy-making processes, according to IAS 28. Without
having a significant influence, the 20% interest in Numericable-SFR was
recognized as an “available-for-sale securities” in Vivendi’s Consolidated
Statement of Financial Position, and, in accordance with IAS 39, was
revalued at the stock market price at each reporting date (€3,987 million
as of December 31, 2014) as the unrealized gains or losses were directly
recognized in equity. From November 27, 2014 to December 31, 2014,
the revaluation of Vivendi’s interest in Numericable-SFR resulted in an
unrealized gain of €743 million (before taxes).
Capital gain on the sale of SFR
In accordance with IFRS, the capital gain on the sale of SFR was
calculated as the difference between the sale price of 100% of SFR
and the value of SFR’s net assets, as recorded in Vivendi’s Consolidated
Financial Statements on the date of the sale. The components of the
sale price are (i) the €13.166 billion cash proceeds, and (ii) the value
of a 20% interest in the new combined entity Numericable-SFR,
valued at the stock market’s price on November 27, 2014 (€33.315 per
share), or €3.244 billion. The earn-out (€750 million) was excluded
from the calculation at this stage, due to its contingent nature. On this
basis, the capital gain on the sale of SFR amounted to €2,378 million
(after taxes), recognized in the Consolidated Statement of Earnings
under the line “Earnings from discontinued operations”. Excluding the
discontinuation
(1)
of amortization since April 1, 2014, in accordance with
IFRS 5, the capital gain on the sale of SFR amounted to €3,459 million.
(1)
When an activity is discontinued, IFRS 5 requires the discontinuation of the amortization of the operation’s tangible and intangible assets. Therefore, for SFR, reported as a
discontinued operation since March 31, 2014, Vivendi discontinued the amortization of tangible and intangible assets as from the second quarter of 2014, resulting in a positive
impact, attributable to Vivendi SA shareholders, of €1,081 million on earnings from discontinued operations from April 1 to November 27, 2014.
Guarantees related to the sale of Maroc Telecom group
Vivendi has agreed to counter-guarantee SFR for any amount that may be
claimed by Etisalat or any third party other than Etisalat in relation with
the sale of its interest in Maroc Telecom:
p
p
with respect to the sale agreement entered into with Etisalat, this
commitment will expire at the expiry of Etisalat’s right to make a
claim against Vivendi and SFR, i.e., on May 14, 2018; and
p
p
this commitment, which will also cover any amount that SFR may
be required to pay to any third-party other than Etisalat, will expire
in the absence of any request from Numericable Group within the
applicable statutes of limitations.
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