Vivendi Verifies $34Bln Merger

PARIS -- The chairman of French utilities and media conglomerate Vivendi SA on Tuesday confirmed plans for a $34 billion merger with Canadian drinks and entertainment giant Seagram Co. and Vivendi's own pay-television unit Canal Plus.


The merger, which had been expected, will combine Seagram's film production and music interests with Vivendi's European cable TV, satellite and Internet distribution systems to create a new group to be called Vivendi Universal, which will be based in Paris.


The new company will create a powerful international entertainment group that will rival AOL-Time Warner, the world leader in the field. It will offer movies, TV programming, music, sports, games, and educational and professional information via digital and analog formats, a communique said.


Vivendi head Jean-Marie Messier told France's Europe-1 radio he wanted "to make the Internet swing" with the deal.


The company would initially have combined revenues of $55 billion, Vivendi said in a statement.


Messier said the company would have no debt and confirmed plans to sell off Seagram's $7 billion to $8 billion drinks business, which he said were nonstrategic assets. He also said he would float about 30 percent of Vivendi Environment, the company's utilities arm.


The goal of the merger was to create a "single, integrated" media company. Messier said he wanted Seagram for its world-famous Universal Studios, which will give it access to the U.S. market and give him a missing piece in his own empire f namely music.


"For the first time in Europe, there is a communication group of a size that will be able to rival all the American giants," said Messier.


The deal will be an all-stock swap, valued at $34 billion, or $77.35 per Seagram share, the communique said.


"It fulfills a number of needs for both companies," said Dennis McAlpine, a media and entertainment analyst at Ryan, Beck & Co. "It gives the Bronfman family a graceful way out of the entertainment business, and it gives Vivendi an American platform."


The markets have not reacted well to the proposed merger. Vivendi's stock has slipped since last week when news of the impending fusion emerged, but Messier brushed off the reaction as simply "speculators playing with stock."


Vivendi stocks were down 6.6 percent Tuesday on the CAC-40, while Canal Plus traded down 7.7 percent before trading was temporarily suspended.


The three companies were to officially announce the merger later Tuesday morning.


Once just a nationalized water company, Messier has transformed the firm into a global media giant with a classy headquarters just off the Arc de Triomphe in Paris, one of the French capital's most prestigious addresses.


Vivendi operates in over 100 countries with 260,000 employees.


The deal is likely to lead to a shakeup at Canal Plus, the French pay-television company in which Vivendi has a 49 percent stake. Vivendi is expected to buy out the 51 percent of Canal Plus that it does not already own and spin off the TV activities to avoid conflict with French government rules on ownership of domestic TV channels.


Messier said he had spoken with French President Jacques Chirac and Prime Minister Lionel Jospin about the deal.


Messier was named chairman of the group. Seagram head Edgar Bronfman Jr. will be vice chairman with responsibility for music and Internet activities, according to the Vivendi communique.