Utilities co dives into media biz, '98 revenues to top $35 bil
PARIS — French utilities giant Compagnie Generale des Eaux (CGE) reaffirmed its media ambitions on Monday by taking over Paris-based media group Havas — the main shareholder in Europe’s largest pay television Canal Plus.
The move, which has been greenlit by the CGE and Havas boards, will be presented to shareholders of both groups on May 11. With Havas under its control, CGE’s estimated revenues for 1998 will be in excess of $35 billion. Last year, Havas posted net profits of $216 million, while CGE’s were at a record $900 million.
The first casualty of the takeover was Havas’ chairman Pierre Dauzier, who has been replaced by Eric Licoys. CGE chairman Jean-Marie Messier, the driving force behind his group’s charge into the media and telecommunications businesses, confirmed Dauzier’s departure, but would not comment on reports that the Havas chairman had been given an $8 million golden handshake.
Since becoming chairman of CGE in 1996, Messier is known to have been unhappy with Havas’ apparent failure to crack the international market, especially in the publishing sector.
Licoys was installed by Messier as Havas’ managing director last year, after CGE took a 30% stake in Havas. The new chairman, who has known Messier since the pair worked together at Lazard Freres in 1990, has already begun restructuring Havas and selling non-core assets.
Messier, 41, has now taken a huge step toward repositioning his 145-year old group from a waterworks services entity into an international player capable of working in the rapidly expanding sectors of telecommunications, media and entertainment. Messier has identified these businesses as a major growth area for CGE .
Speaking in Paris on Monday, the CGE chairman noted “if we want to be a key player (in media and telecommunications), we have to move quickly. We are small, regional and late (into the business).”
Messier said that the takeover was a logical move in a world where large media companies are growing ever bigger. He noted that since 1993, there have been a series of major takeovers and mergers in the entertainment and publishing worlds, including the 1993 deal between Reed and Elsevier, Viacom’s acquisition of Paramount, Seagram’s deal with MCA, Time Warner’s acquisition of Turner in 1995 and Disney taking control of Cap Cities-ABC.
Messier said that compared with the revenues of Time Warner or Disney, CGE is a media minnow. Messier’s group’s communications revenues for 1996-97 were around $8 billion, while Time Warner was nearer $24 billion and Disney $20 billion.
The CGE chairman snapped back at those who have suggested that the takeover will see the splitting up of Havas and that his real interest is to get his hands on the considerable funds in Havas’ coffers. “This is not the death of Havas, it’s a second life,” he said.
When the merger gets the blessing of Havas and CGE shareholders, CGE’s communications division will unite Havas’ publishing expertise with Canal Plus’ broadcasting capability and Cegetel’s telecom businesses.
Cegetel is 44% owned by CGE, and has just launched itself into the traditional telephony sector following deregulation at the start of the year. The company is already France’s second-biggest mobile telephone operator.
As part of the takeover, CGE, which is changing its name in June to reflect the declining importance of “eaux” (water) in the group’s strategy, will take control of Havas’ 34% stake in Canal Plus. However, it seems unlikely that Messier will try to impose his will on Canal Plus as he has done on Havas since early last year. Messier and Canal Plus chairman Pierre Lescure are said to have considerably warmer relations than was ever the case between the CGE boss and Pierre Dauzier.
The future of other film and TV companies in which Havas has a stake is still not clear. Havas has shares in film production, distribution and exhibition major UGC, distributor Bac Films, minimajor MK2 and TV production company Tele Images. Speaking just hours after being named chairman of Havas, Eric Licoys said that Tele Images is currently negotiating a management buyout.
Under the terms of the takeover, Havas shareholders will get an exceptional distribution of 107 francs ($19.30) per share, as well as a tax credit of $3.80 a share. The Havas distribution will total $1.4 billion. Havas stockholders will be offered two CGE shares for five Havas shares.
Despite regular profits, Havas has tended to underwhelm brokers on the Paris Bourse. Havas stock has dropped 15% since 1990, while CGE shares have risen 80%.