Vivendi employees back Bollore against activist challenge

PARIS (Reuters) - Vivendi employees have come out in support of chairman and largest shareholder Vincent Bollore and have opposed a call by a U.S. hedge fund to sell one of the French media group's two remaining businesses.

Activist investor P. Schoenfeld Asset Management (PSAM), which says it owns 0.8 percent of VIVENDI (VIV.PA) has urged Vivendi to consider spinning off Universal Music Group, one of its two remaining businesses alongside Canal Plus.

Paulo Cardoso, who represents employees on the Vivendi board, said in a letter dated March 20 that such a move would amount to a "dismantling and break-up of Vivendi".

"We are vehemently opposed to such a proposal," he wrote. "We are confident that our group can become an international player in media and content generating strong job creation through a long-term strategy."

Vivendi employees own 3.1 percent of the company's shares, according to Thomson Reuters data.

PSAM is trying to rally other shareholders to vote for two resolutions at an April 17 meeting that would require Vivendi to boost returns to shareholders to 9 billion euros ($9.8 billion) after asset sales left it with a pile of cash.

The fund has also criticized Vivendi's governance and the role of Bollore, who recently bought 632 million euros worth of Vivendi shares to take his stake to 10 percent of the company.

The French tycoon has overseen a radical slimming down of the company in the past two years, in which time it has sold four of six divisions, exited telecoms and amassed a cash pile which stood at 4.6 billion euros at the end of 2014.

Vivendi said in April it planned to pay out 5.7 billion euros to shareholders in dividends and buy backs by 2017, but wanted to keep some cash to build itself into a stronger media company via organic growth and acquisitions.

PSAM believes the money should be returned to shareholders instead and that it makes little sense to try to build up Vivendi into a bigger media company when its two businesses, music and pay-TV, have little in common.

(Reporting by Leila Abboud; editing by Susan Thomas)