Viv Uni’s plans don’t hold water
November 8, 2002 - The Hollywood Reporter
Breaking with its corporate roots in the utilities sector, media conglomerate Vivendi Universal said Thursday that it plans to further reduce — and potentially give up completely — its 40.4% stake in waste and water giant Vivendi Environnement via private transactions rather than through the open market.
The move will enable Vivendi Uni to cut more out of its €19 billion ($19.2 billion) debt load than projected and help it potentially trump a bid by U.K. telecom giant Vodafone for control of French telecom Cegetel.
Vivendi Uni also said it has now reached a final agreement to sell its U.S. educational publishing unit Houghton Mifflin to two buyout firms for $1.66 billion in cash and debt.
Under former CEO Jean-Marie Messier, who was ousted in July, Vivendi Uni remodeled itself from a utility into a conglomerate with interests in various fields of media, entertainment and telecom. But faced with a severe cash crunch, new CEO Jean-Rene Fourtou has worked to sell assets and focus Vivendi Uni more narrowly.
With Vivendi Uni entertainment chief Barry Diller opposing a spinoff of the media properties and Fourtou looking to potentially take control of cash-rich telecom Cegetel, management’s decision by default seems to have been to exit the utilities holding, which represents only a minority holding and thereby cannot be consolidated into Vivendi Uni’s financial reports.
The company wants to sell off its holding in VE in a two-stage process to a “limited number of investors,” Vivendi Uni said in a statement late Thursday.
In the first stage, which Vivendi Uni indicated could happen before year’s end, the conglomerate will sell 50% of its stake, and each share sold will carry an option to buy one extra share by Dec. 21, 2004.
“After the exercise of the call options, Vivendi Universal will no longer own any Vivendi Environnement shares,” the company said.
Vivendi Uni has previously not sold further shares in VE in the face of several lockup agreements, the largest portion of which expire Dec. 21, 2003. But Vivendi Uni said Thursday that the obligation to hold on to utility shares until that date would simply be passed on to the buyers of its VE stock.
The company didn’t specify who the likely buyers are. But observers have in the past speculated that Vivendi Uni may try to sell its utility holding to French institutions so that VE can remain under domestic control.
It will also help Vivendi Uni’s pay TV group Canal Plus make sure it has the money it needs for its bid to retain the French soccer rights it holds until 2004.
The sale of its VE holding will boost Vivendi Uni’s debt reduction plans, which have called for €12 billion ($12.1 billion) in asset sales by the end of next year.
Including the VE sale, Vivendi Uni said Thursday that it should have sold €7 billion ($7.1 billion) in assets by year’s end, compared with €5 billion ($5.04 billion) as of today. By the end of 2004, the amount should have reached €16 billion ($16.14 billion), the company added.
Being ahead of its disposal schedule, Vivendi Uni said it has “sufficient cash leeway” to approach its next debt payment in March “with confidence.” As a result, it is also reconsidering its financial structure and has asked its banks to postpone the effective date of a — now potentially unnecessary — €3 billion ($3.03 billion) credit line to Nov. 25.
In recent weeks, Vivendi Uni has been working to raise €4 billion ($4.04 billion) to match Vodafone’s bid for control of cash-rich French telecom firm Cegetel. Under the Cegetel shareholder agreement, Vivendi Uni — the largest shareholder, with 44% — only has to match Vodafone’s bid for at least one other equity holder. Most observers expect Vivendi Uni to match the €4 billion bid for the 26% owned by British Telecom. Vivendi Uni has until Dec. 10 to match Vodafone’s offer.
In other debt reduction news, Vivendi Uni said the final Houghton Mifflin buyers are Thomas H. Lee Partners and Bain Capital, which had originally offered to acquire the publisher with two other private equity firms, the Blackstone Group and Apax Partners. Blackstone and Apax were not mentioned in Vivendi Uni’s announcement, and officials for the firms couldn’t be reached late in the day.
Before the announcement, Vivendi Uni shares fell 3.8% to 13 in Paris. In New York, American depository shares of Vivendi Uni dropped 2.6% to 13.40.
Georg Szalai reported from New York; Joe Ray reported from Paris.
