Vivendi Talks Spin-Off with Liberty
Tue Aug 20,12:17 PM ET
By Merissa Marr, European media correspondent
story.news.yahoo.com
LONDON (Reuters) - Stumbling media giant Vivendi Universal is considering a retreat from Hollywood by spinning off its U.S. entertainment business in a deal that could involve cable empire Liberty Media Corp.
In a drive to cut crippling debts, Vivendi is exploring a public offering of its Universal film and music arm, which may also see Liberty Media jump on board by merging in some of its cable assets, sources close to the companies said on Tuesday.
"Vivendi has said it will not sell the Universal assets outright, but it is looking at spinning them off," said one source close to the companies. "Liberty Media has been discussing a number of options with Vivendi, one being merging some cable assets into the entertainment arm."
Vivendi's newly-recruited Chief Executive Jean Rene Fourtou is drawing up a grand plan for sweeping asset sales to rein in debts and help resolve a cash crisis left behind by his acquisition-hungry predecessor Jean-Marie Messier.
Messier had been on a campaign to woo Hollywood, spending generously on assets including moviemaker Universal Pictures and music powerhouse Universal Music, but Vivendi's new French management has cooled to the Californian dream, sources said. Vivendi shares jumped on hopes of a spin-off, building on Monday's 20 percent bounce after last week's mauling on its cash crisis. The stock closed 11.5 percent higher at 12.70 euros in Paris while shares in its utility Vivendi Environnement roared 16 percent higher after a vote to separate its debt.
"In my view, Vivendi has two options -- either go the route of an IPO, which will eventually see the U.S. entertainment assets taken out by a rival, or combine with another entity to give the business needed scale," said one U.S.-based analyst.
DISENTANGLING EMPIRES
In a separate development, Vivendi Environnement bondholders agreed on Tuesday to further disentangle the utility business from its former majority shareholder Vivendi Universal.
In a vote in Paris the bondholders agreed to release the utility from its obligation to buy out bonds if Vivendi Universal defaulted on its own borrowings.
However, Fourtou has said Vivendi Environnement may not be among assets sold as part of his disposal master plan, which has already seen the U.S. publishing business Houghton Mifflin and international Canal Plus assets put on the block.
Former pharmaceutical boss Fourtou also ruled out the sale of the Universal assets, but sources close to the company said a demerger would see Vivendi retain control for the time being.
Fourtou is still considering various options for the U.S. entertainment arm, sources said. Liberty could merge some of its assets into the business in return for a stake or swap its stake in the parent company for a bigger Universal stake.
But other strategic investors may also emerge.
Liberty Media, controlled by cable king John Malone, is already a key shareholder in Vivendi Universal with close to four percent. Malone is also a long-time ally of Barry Diller, the head of Vivendi's U.S. entertainment business.
Last month, Malone was reported to be open to playing a bigger role in the entertainment business.
The Wall Street Journal reported earlier that Liberty was looking at merging its Starz and Encore cable networks and interest in the Discovery Channel's parent with Vivendi's U.S. entertainment business as part of a spin-off.
DILLER GEARING UP
Sources said Hollywood old-timer Diller had been gearing up for a spin-off for some months, even before Messier was turfed out. Diller would head a demerged U.S. entertainment empire.
"This what Diller wanted all along," said one source.
Vivendi shares slumped 45 percent last week after credit rating agencies slashed their ratings on concerns over the Franco American group's cash position and after the group took a massive goodwill write-down in its first half results.
Aside from the spin-off, dealers said Vivendi's shares were powered on Tuesday after breaking through a key 12 euro barrier.
"Many people opened short positions not believing the stock would be back at these levels, and so had to cover their position by buying back the stock, fueling the rise even more," said a senior trader in Paris.
(additional reporting by Benoit Van Overstraeten and Marie Maitre in Paris) |
