Canal++ should attract a valuation of less than half the €8 billion that the French television and film group was thought to be hoping to fetch as part of a listing on the London Stock Exchange later this year.
This is the view of UBS, which cut its valuation for Canal+ to €3 billion from just under €4 billion, following a meeting between the company and major investors and analysts earlier this week.
Financial guidance for 2025 "surprised to the downside", UBS said, with negative revenue growth, only a moderate improvement in earnings and flat cash flow from operations, while no explicit medium-term financial targets were provided either.
"We believe the company is likely waiting for the MultiChoice deal to close before it provides more guidance," UBS said, referring to the takeover of the South African pay-TV giant agreed earlier this year.
The valuation was cut mainly due to lower expectations for 2025 free cash flows, which UBS cut 39% to €185 million, though the Swiss bank said it still believes there is "a path to meaningful improvement" in cash generation between 2025 and 2028 as underperforming assets are turned around.
Canal+, which owns Paddington film series producer StudioCanal, said in its prospectus that it plans to float in London and then take a secondary listing in Johannesburg.
A London IPO could prove a key boost for the Square Mile after a deathly quiet few years in terms of comings, seemingly outnumbered by goings.
While Canal+ had reportedly been aiming for a valuation of between €6 billion and €8 billion, which would put the company around the middle of the FTSE 100 index, a market cap in line with UBS's valuation would see the company join the upper echelons of the FTSE 250.
Vivendi shareholders will vote on the break-up plan on December 9, following a capital markets day for Canal+ earlier this week.
Should the "split project" be approved by investors, the first listing of the shares of Canal+, could take place on December 16.
For London's stock exchange, it would provide a welcomed boost, with only 10 companies listing in the first nine months of 2024, drumming up a total of £584.6 million, down 47% compared to the same period in 2023, with last year seeing the second-lowest total in three decades.