VU alters plan on publishing sale
October 11, 2002 - The Hollywood Reporter
Vivendi Universal said Wednesday that it will sell the non-U.S. assets of Vivendi Universal Publishing to French media-to-defense conglomerate Lagardere for €1.25 billion ($1.22 billion) in cash and debt.
The move had been expected (HR 10/23). But Vivendi changed its original plans for the deal and said Wednesday that it will now look to sell Boston-based educational publisher Houghton Mifflin in a separate deal — which could come as early as Friday — after bids for that business came in below the company’s expectations.
The partial sale of the non-U.S. assets is structured in such a way that it will strengthen Vivendi Uni’s financial position ahead of a Nov. 10 deadline, by which it has the right to match a bid by telecom giant Vodafone Group for control of French telecom operator Cegetel.
Sources said Wednesday that Vivendi Uni, which holds 44% of Cegetel, seemed to have decided to make such a play for control.
The conglomerate has so far said it continues to mull all options with regard to Cegetel, and analysts have expressed doubt that the debt-laden Vivendi Uni will be able fast enough to raise the €4 billion ($3.9 billion) necessary to counter Vodafone’s attempt to take control of Cegetel.
But sources familiar with the situation said Wednesday that Vivendi Uni is planning a legal battle to push back the Nov. 10 deadline and is at the same time discussing various financing options for a takeover of Cegetel that would not involve big cash outlays.
Vivendi Uni spokespeople in Paris and New York declined to comment. In a statement, however, the company dismissed market rumors that it could issue bonds convertible into shares of its Vivendi Environment operation to finance a play for Cegetel.
To strengthen the firm’s balance sheet, selling off the VUP assets has been a priority for Vivendi Uni executives in recent days. “This agreement fully meets the three interlinked objectives that we set when we made the difficult decision to sell our publishing businesses,” Vivendi Uni chairman and CEO Jean-Rene Fourtou said Wednesday about the sale of the French parts of VUP.
The three objectives were the reduction of Vivendi’s €17 billion ($16.6 billion) debt load, French cultural and heritage concerns and “growth prospects” for VUP in France and throughout Europe.
Lagardere is owner of Hachette Livre publishers, and the deal will make Hachette the largest publisher in France.
Technically, the sale initially will go to a bank, Natexis-Banque Populaire, which will hold VUP and then sell it to Lagardere once regulatory issues are worked out with France and the European Union. Observers said Wednesday that the process could take several months. By using Natexis as an intermediary in the sale, Vivendi Uni effectively will have access to the cash portion of the VUP price tag even before regulators greenlight the deal, sources said.
As far as Houghton Mifflin goes, three consortia that bid for VUP in its entirety Monday now will have a chance to “significantly” raise their offer prices by the end of the business day Friday, according to Vivendi Uni. If the conglomerate doesn’t get an offer that it is happy with, it will launch an auction process that will be open to previous as well as new bidders, the company said.
Sources close to the situation said Vivendi Uni is hoping to fetch at least the $2.2 billion that it paid to acquire Houghton Mifflin last year. However, given previous write-downs on past acquisitions, Vivendi Uni executives are said to expect they will get a lower price tag.
In Paris trading, Vivendi shares ended the day down 9.33% to €12.07 ($11.76). Lagardere shares, however, were up 6.85% to €42.66 ($41.58).
Joe Ray reported from Paris; Georg Szalai reported from New York.
