Posted on 04/29/2003 1:27:16 PM PDT by j_tull
By Tim Hepher and Merissa Marr
PARIS (Reuters) - Giant media company Vivendi Universal officially hoisted a for-sale sign over its American entertainment empire on Tuesday, smashing the Hollywood dream of a French firm that slid from boom to near-bust.
Almost a year after the ouster of ex-Chief Executive Officer Jean-Marie Messier, who turned Vivendi from a water company into a media titan with huge debts, the veteran company fixer brought in to replace him pulled down the curtain on a three-year dalliance with Tinseltown.
Current CEO Jean-Rene Fourtou said Vivendi's future lay in telecommunications and French television -- not Hollywood -- telling shareholders it was "illusory" to think Vivendi could run a U.S. empire spanning Universal studios, theme parks and cable television from Paris.
Setting out a strategy in the boldest terms since he arrived last July, Fourtou told Vivendi's annual general meeting that the computer games business would also be sold but that music may still be a part of Vivendi next year when he hopes to have finished his restructuring job.
Firming up the company's previous line that Vivendi had been approached about its Hollywood interests and was open to offers, Fourtou said the Paris-based group was already in talks with potential contenders for all or part of the U.S. media business.
Fourtou had been under pressure to spell out Vivendi's strategy after a string of asset sales since Messier fell to a boardroom coup last July. Vivendi's debts have fallen sharply since he took over, and Fourtou said he expected the company to be practically debt-free by the end of 2004.
Facing shareholders for the first time, Fourtou fended off outbursts from investors who have seen their shares plummet.
"I kept buying shares for a bit more, then a bit more, because Mr, Messier made me dream of cinema and more besides; then it was all a catastrophe. ... Can you give me back my dream?," one shareholder asked.
"(In) 2004," Fourtou replied.
FOURTOU EXIT?
Fourtou said it would take two years to unravel Messier's mess. But Fourtou, brought out of semi-retirement to run Vivendi, hinted that when the job of restructuring was over, his own role would be finished too.
Fourtou said Vivendi would likely have a new management team by the end of 2004.
"It will be in the autumn of 2004 that the market will be able to appreciate the true value of the group," he said.
Declaring healthy finances his first priority, Fourtou told the annual meeting he believed Vivendi could go further than its target of selling 7 billion euros in assets in 2003, especially if the group sold all or part of its U.S. assets.
Vivendi's U.S. retreat marks the second time French ambitions have tripped up on Hollywood's "boulevard of broken dreams." French bank Credit Lyonnais made a disastrous investment in MGM studios in the 1990s.
Messier bought the Universal films and music empire from Canada's Bronfman family to forge the world's second largest media firm in 2000, renting part of the Louvre Museum to celebrate France's biggest transatlantic business coup.
But the dream turned sour after frenzied deals done at the top of the market amassed more than 20 billion euros of media debt and left Vivendi teetering on the edge of bankruptcy.
"It is illusory to believe that we can manage and develop (the U.S. entertainment assets) by ourselves," Fourtou said.
Vivendi reacted coolly when Texan billionaire Marvin Davis offered $15 billion for all its U.S. assets last year but has since been in touch with other suitors for Vivendi Universal Entertainment, including huge media company Viacom Inc. of the United States.
A source close to the talks told Reuters in London that any deal on Vivendi Universal Entertainment would not happen until June at the earliest.
"This is a summertime deal," the source said.
Vivendi shares closed up 1.4 percent on Tuesday at 14.3 euros -- they have risen about 50 percent from their worst point last year, but are little changed from when Fourtou came in.
FUTURE IN MUSIC
Faced with dire conditions in the music industry, Fourtou said Universal Music would probably be part of the Vivendi he envisaged for 2004, either as a whole or in a partnership.
Sources close to the matter say Vivendi is leaning toward holding onto Universal Music Group, in which U.S. computer firm Apple Computer Inc. has been reported to be interested.
However, Fourtou said telecommunications was where the real cash was.
If Vivendi managed to sell Vivendi Universal Entertainment, Fourtou said the group would boost its stake in Morocco's Maroc Telecom, even though it bought its 35 percent stake at an inflated price.
In December, Fourtou increased Vivendi's stake in French telecoms business Cegetel, parent of mobile operator SFR.
"My immediate conclusion was that if we kept anything it would be this excellent activity," he said.
On the computer games unit, Fourtou said he wanted to sell the business but first needed to consider whether it would be better to wait until the market improved or to just find a partner.
Most analysts were comforted by the strategy.
"It surprised me the extent of detail that Fourtou gave. I was half expecting him to continue his strategic ambiguity, but he was under a lot of pressure from shareholders," said Mark Harrington, analyst at Bear Stearns in London. (Additional reporting by Tom Bergin, Noah Barkin and Reshma Kapadia)
So funny the way Hollywood knows just how to take this type of investor to the cleaners the long way.
(steely)
Any chance the FTC would have something to say to further consolidation?
What's the downside? Maybe a conservative concern will snap it up.
Viacom is CBS is MTV is VH1......and has DEEP pockets even if Paramount Pictures couldn't put out a big hit if you forced them.
Disney is ABC.....Not really going to freak out shareholders with that kind of purchase right now.
NBC is in bed with who and probably wouldn't be shopping right now
AOL/TW is in no position to buy anything right now.
If it's another "studio" that's doing the buying, there only look to be two in the market with wallets.
I think Disney still owns Miramax.
Sure would make a nice fit into their portfolio, IMO. They've got a LOT of radio stations, They syndicate a LOT of radio content (A good deal of it conservative Talk), They have Arenas, They have pretty much the only alternative to Ticketmaster in cc.com.
Of course, there are some things about Clear Channel that may be viewed as not so good depending on how you look at them:
-Do you really want one company controlling the majority of Radio stations in the country? It's now a freer market with the relaxation of ownership rules AND smaller fish have a better shot in Radio than any other media at present BUT Clear Channel's dominance in the market has led to more homoginization of radio content. The predominant formats suck, the playlists and repitition are at horrible levels and sitting through 18 straight minutes of commercials waiting for the weather can drive you mad.
Clear Channel is able to leverage it's position to do things people have come to dislike. In time, it is entirely possible that all Clear Channel stations will eliminate local on-air talend in favor of "national" announcers/DJ's and talkers....we're looking at robot stations.
Of course, if you view that as better QUALITY, that's a good thing. I've been more of the opinion that greater competition arising from diversity (at least insofar as radio and TV)drives better quality.
Overall, Media - TRADITIONAL Media - has seen the big fish in the pond swallow up all the smaller fish as of late. Nothing wrong with free enterprise but at some point, it stops being free per-se. NewsCorp buying the majority stake in DirecTV from GM is a great business move...very smart when you group it with BSkyB and other holdings but - playing Devil's advocate for a minute - what if in the future ONE company controls the entire news conduit? (there was just such a fictional scenario discussed in the horrid movie Meet Joe Black). Hey, COULD happen....look at what CNN ALMOST became.
I doubt that Vivendi's roster of "takers" will include anyone outside the usual suspects: SONY, VIACOM, MICROSOFT, Clear Channel (maybe), Disney, AOL/TW, NewsCorp......
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