[dvd-discuss] Vivendi....

[microlenz(at)earthlink.net]

Interesting news about Vivendi....although probably they will claim piracy did 
them in...looks more like another Enron, Tyco, Worldcom


http://www.nytimes.com/2002/07/02/business/02CND-
VIVENDI.html?ei=5006&en=5b3095233f791201&ex=1026273600&partner=ALTAVISTA1&pagewa
nted=print&position=top

==================================================== 

July 2, 2002

Vivendi's Chief Quits, and Shares Fall on Accounting Fears

By SUZANNE KAPNER with LAURA M. HOLSON

    ONDON, July 2 - Jean-Marie Messier's ambitious, at times improbable, 
campaign to remake an aged
    French water utility into a global media giant ended Monday when he 
resigned as the chief executive
and chairman of Vivendi Universal. 

Mr. Messier, 45, submitted his resignation by letter, then announced his 
departure today in the French daily
Le Figaro. 

``I am leaving so that Vivendi Universal stays,'' the newspaper quoted Mr. 
Messier as saying. ``You cannot
lead a company if the board is divided.'' 

Despite the end of the uncertainty about Mr. Messier's fate, shares of Vivendi 
plunged as much as 40
percent today after an article in Le Monde, another French daily, raised 
questions about about the
company's accounting practices in the sale of its stake in British Sky 
Broadcasting Group last year. In
addition, Vivendi's credit rating was cut to ``junk bond'' status by Moody's 
Investors Service on concerns
about its ability to pay off 3.5 billion euros ($3.4 billion) in debt coming 
due in the next 12 months. 

Those losses in Vivendi's stock price narrowed later today after the company 
denied the report in Le
Monde. It said that it strictly followed accounting rules on the sale and that 
the Securities and Exchange
Commission in the United States did not object to its accounting treatment. 

In Paris trading, Vivendi's shares fell 6.10 euros, or 25 percent, to close at 
17.8 euros, after trading as low
as 14.13 euros. That was the stock's lowest close in nearly 15 years. Vivendi's 
shares are down more than
87 percent from their closing high of 141.60 euros in March 2000. 

[On the New York Stock Exchange today, Vivendi's American depositary receipts, 
each representing one
share, fell $4.69, or 21 percent, to close at $17.76.] 

In six years at the head of the company that was called Compagnie Générale des 
Eaux when he arrived and
that he tried to revivify by naming Vivendi, Mr. Messier, a former French 
government official and investment
banker, rode the Internet and media trends of the era through a series of 
strategy shifts and
multibillion-dollar acquisitions. The most notable deal was the $34 billion 
stock purchase of Seagram and its
Universal movie, music and other media units in 2000. 

By some measures, Vivendi is performing better than its peers, outpacing both 
AOL Time Warner and the
Walt Disney Company in revenue growth in the first quarter, for example. But 
Mr. Messier was brought
down by his own missteps and bad timing, the staggering debt that the company 
amassed during his tenure
and his alienation of the French business establishment as he pushed too hard 
to recast Vivendi as an
American-style corporation. 

And as the company's stock price plunged this year, he lost the support of the 
Bronfman family, who
became Vivendi's largest shareholders when they sold Seagram. The Bronfmans, 
who hold three seats on
the Vivendi Universal board, had called for Mr. Messier's ouster last week. On 
Friday, French members of
the board, apparently having lined up a French executive to replace Mr. 
Messier, joined forces with the
Bronfmans and asked for his resignation. 

A board meeting in Paris is scheduled for Wednesday to approve a successor to 
Mr. Messier. The favored
candidate is Jean-RenÀe Fourtou, the vice chairman of the board of the French-
German pharmaceutical
giant Aventis. But not all of Vivendi's directors have yet approved Mr. 
Fourtou's appointment, a person
close to the board said. 

Other possible contenders include Marc Vienot, honorary chairman of SociÀetÀe 
GÀenÀerale, and
Charles De Croisset, chairman of CrÀedit Commercial de France, part of HSBC. 
Mr. Messier has given
his backing to Mr. De Croisset, but it is unclear how much influence Mr. 
Messier retains, people close to
the company said. 

Besides trying to reduce the company's 33 billion euros ($32.7 billion) of 
debt, a new chief executive will
also be under pressure to refine Vivendi's strategy, analysts said. Will 
Vivendi stay true to its roots and
remain a French company, embroiled in the byzantine affairs of national 
politics, they wonder? Or will it
follow the path that Mr. Messier embarked on by keeping its feet firmly planted 
in the United States? 

Either way, Mr. Messier's vision of a company at the intersection of media and 
telecommunications - one
that would deliver the latest content through the Internet, television and 
mobile phones - is no longer viable,
analysts said. 

Mr. Messier's departure ``is a signal that the board has thrown the towel in on 
his strategic vision,'' said
Nick Bell, a Bear, Stearns analyst. ``Whoever comes in will have a permit to 
restructure the group.'' 

Besides acquiring Seagram and Universal, Mr. Messier snapped up Canal Plus, 
Europe's largest pay
television company, and Barry Diller's USA Networks among other media 
properties. 

The acquisition of the Seagram entertainment assets and the subsequent sale of 
its beverage business gave
the Bronfmans a 5.2 percent stake in Vivendi. 

``The great irony in this situation is the Bronfman family,'' said Hugh Hendry, 
an analyst with Odey Asset
Management, a hedge fund based in London. ``They swapped a wonderful drinks 
business for a mirage.'' 

Any revamping of Vivendi Universal is likely to be politically and 
geographically charged. Members of the
French business establishment, including Vivendi directors and government 
officials, are intent on keeping
Vivendi in French hands. French board members, for instance, initially resisted 
the Bronfmans' pressure to
remove Mr. Messier, waiting until they had a compatriot lined up to succeed Mr. 
Messier. 

Yet many of the company's more promising assets are in the United States, 
analysts pointed out. The
French businesses, by contrast, consist of a grab bag of companies in which 
Vivendi has a minority stake
and cannot exercise management control, including a 44 percent stake in 
Cegetel, France's second-largest
phone company; a 35 percent stake in Maroc Telecom, a Moroccan phone company; 
and a 40 percent
stake in Vivendi Environnement, the water company that was part of the original 
business. Vivendi has
management control over Canal Plus, but that business has been losing money for 
years. 

Without the American assets, Mr. Bell said, Vivendi ``would be an ugly 
duckling.'' 

The person with the most to gain from the management change is Mr. Diller, 
chief executive of Vivendi
Universal Entertainment, who stands to reap $275 million in cash in the next 
year as part of his agreement
last December to merge USA Networks with Vivendi's entertainment assets. Many 
people have suggested
that Mr. Diller wants to spin off the entertainment assets into a publicly 
traded company. He has denied that
and would be unable to do it without the board's backing. 

But two people close to the company said Vivendi Universal was exploring 
whether to create a separately
traded tracking stock that would have reflected the value of United States 
entertainment companies
separately from the European assets. 

By issuing a tracking stock, a type of security pegged to the performance of a 
business without granting
holders rights of ownership, Vivendi could raise much-needed cash without 
having to sell any assets. 

And some analysts warned against expecting a new executive to seek quick 
solutions to problems at
Vivendi. Near term, Mr. Messier's successor will have to placate a group of 
French banks to get them to
refinance some 9 billion euros of short-term debt that come due this year. 

The one certainty, said Mr. Hendry, the analyst, is that ``the days of the star 
C.E.O. are over.'' 

At his zenith, few chief executives carried more star power than Mr. Messier, a 
former Lazard banker, who
welcomed the media spotlight atop Vivendi. His face, with its customary half-
grin, has been a fixture on talk
shows, magazine covers and billboards adorning Paris street corners. And his 
arrogance is legendary. 

Just last week, after escaping a call for his resignation, Mr. Messier boasted 
to journalists on a conference
call that he would be happy to run Vivendi for the next 15 years. 

Indeed, his reversal of fortune was swift. Although pressure had been mounting 
for months on Mr. Messier,
many observers expected him to weather the storm. But Mr. Messier suffered two 
critical setbacks last
week, when Vivendi's five North American directors voted to remove him, and a 
crucial ally, Bernard
Arnault, the chief executive of LVMH MoÃet Hennessy Louis Vuitton, resigned 
from Vivendi's board. 

Vivendi's shares continued to plunge even after the company sold a stake last 
week in Vivendi
Environnement. That move might normally have been seen positively by investors 
since it raised money to
pay down debt. But the stake sale alarmed some of the French directors, who saw 
it as an impetuous move
on Mr. Messier's part that undermined their support, a person close to the 
board said. 

A meeting of the French and North American directors on Friday, where the two 
factions agreed to bury
their differences, sealed Mr. Messier's fate, this person said. Two French 
directors, Jacques Friedmann, a
director of cobiBNP Paribascoei, the large French bank that is among Vivendi's 
largest lenders, and Henry
Schneider, the chief executive of Schneider Electric, paid a visit to Mr. 
Messier on Friday and asked him to
resign, this person said. 

On Monday, after several days of buying time, Mr. Messier capitulated. 


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