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CGE may book a deal for Simon & Schuster

Viacom company could sell for $3.5 bil

NEW YORK — French conglomerate Compagnie Generale des Eaux, which last week agreed to buy French media group Havas, may bid for Viacom Inc.’s Simon & Schuster, CGE chairman Jean-Marie Messier said Tuesday.

CGE, which now owns 30% of Havas, is bidding for the outstanding 70% in a deal worth $6.5 billion and approved by Havas’ board. In an interview Tuesday during a daylong visit to New York, Messier said CGE wants to develop Havas’ publishing business.

Viacom has put the educational, professional and reference parts of Simon & Schuster on the market at a price expected to fetch about $3.5 billion, although most industry observers believe the divisions will be sold separately.

Messier said CGE planned to work on developing each of Havas’ publishing areas, noting it is now strongest in information technology and educational publishing, although the company also has medical, professional and legal publishing businesses. At the same time, Havas was willing to “consider following up opportunities, including U.S. acquisitions.”

He said a bid for Simon & Schuster was a “possibility. We are thinking about it,” although he hinted that Havas would make a bid only in partnership with another company.

Messier said acquisitions in publishing right now were “costly,” but added, “You can imagine an alliance between Havas and another European partner to make a common bid.”

Messier declined to comment about whether Havas has already lined up a partner. Investment bankers said there is talk in Europe that Havas could team with Wolters Kluwer, a Dutch publishing company that recently broke off a proposed merger with Reed Elsevier. (Reed Elsevier is the parent company of Daily Variety).

Messier’s comments highlight how he will change Havas’ direction, as Havas’ publishing execs had been telling bankers in recent weeks that the company was unlikely to make a bid for Simon & Schuster, although it may be interested in buying assets of Simon & Schuster after the divisions are sold.

Likely buyers

Most likely buyers for Simon & Schuster are seen as Pearson, Harcourt General, Houghton Mifflin, McGraw-Hill and some leveraged buyout firms, Wall Streeters say.

Messier is believed to have been unhappy with Havas’ failure to expand into the international publishing market.

In the interview, he strongly criticized Havas’ management, saying it had “significant margin for improvement of profitability because Havas has been managed as an overcapitalized group and without any real operational leadership.”

CGE already has replaced Havas chairman Pierre Dauzier with Eric Licoys, who is known to be close to Messier. Licoys had been made managing director of Havas last year after CGE bought its 30% stake in the company.

Aside from publishing, Havas’ main businesses are advertising and entertainment through its 34% stake in European pay TV operator Canal Plus. Messier confirmed speculation in Europe that he wanted to form an alliance between Canal Plus and Bertelsmann’s CLT-Ufa, although he emphasized he was “not thinking in terms of a capital transaction.”

Leveraging strengths

Instead, Messier said that management conflicts between the two companies should have disappeared by now, and he said the two TV companies could work together to “leverage their common strengths” in various areas including program purchasing, particularly on sports rights, which have become very expensive. Messier added that the European “audiovisual industry is too fragmented” and is pushing up the cost of buying rights.

Messier also wants Havas’ ad business to grow, particularly overseas, and he is open to merging that business with another company.

“We think that there is consolidation going on in the advertising industry and that Havas advertising is not yet reached the critical size and that a merger would help Havas to reach critical size,” Messier said.

He particularly wants the advertising business to grow in the U.S., now the second-largest market for Havas.

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