Messier mulls move to up stake in USA

Vivendi may swap stake in BSkyB for Liberty Media's 20%

This story was corrected on April 2, 2001.

Could Barry Diller be getting a boss?

Vivendi chairman Jean-Marie Messier says he may swap some of the Universal parent’s 23% stake in satcaster British Sky Broadcasting for Liberty Media’s 20% stake in Diller’s USA Networks. Such a move would give Messier and Vivendi a majority hold on USA.

While the European press has quietly speculated about such an effort of late, Messier’s acknowledgment Monday that Vivendi may move to control USA was received as significant news.

‘Favorable exchange’

“This would be a very favorable exchange; the BSkyB stake does nothing strategically for Vivendi,” Credit Lyonnais analyst Edouard Tetreau said. “It would reinforce their distribution network in the U.S.”

It also would return effective control of sundry cable TV assets to Universal Studios, which earlier traded those operations to USA for a 43% stake in Diller’s growing media group. Vivendi acquired that USA stake in a three-way merger with Universal parent Seagram and pay TV giant Canal Plus last year.

Ever since, there’s been some talk of a possible move by Vivendi to boost its USA holding. Meanwhile, Vivendi must dispose of the BSkyB shares by October 2002, as the European Commission ordered such a move in approving the Vivendi-Seagram-Canal Plus merger.

The latest clue to how Vivendi might dispose of its BSkyB shares came in response to a question at a conference sponsored by French bank Credit Lyonnais when Messier said Vivendi would consider a swap of some of the shares for Liberty’s USA stake. Such a transaction would increase Vivendi’s stake in USA to 63% and likely require the swap of only just over half of its BSkyB shares.

Reps at Vivendi and USA declined to elaborate on the matter.

Not at Liberty to say

At least one insider at USA insisted such a deal is highly unlikely, and Diller is famous for wanting to operate free of interference from corporate bosses. Diller’s voting power at USA Networks is guaranteed to reflect his own ownership position and any equity stake held by Vivendi Universal and Liberty Media Group.

But another big question is how Liberty topper John Malone feels about such a proposal; a Liberty spokeswoman declined comment.

Just last month, Malone left open the possibility of a deal with Vivendi, while implying nothing was imminent.

“Maybe it gets to the point where our love for Barry could be damaged by economic opportunity,” he said. “At the moment, we just like the USA asset a lot better than we like the BSkyB asset.”

UBS Warburg analyst Christopher Dixon suggested it’s also premature for Messier to be locking into any decisions about the BSkyB shares. He can’t make any decision about what to do with his BSkyB shares until after somebody acquires U.S. satcaster DirecTV from General Motors’ Hughes unit, Dixon said.

News Corp. has been considered the lead buyer, but until a DirecTV deal is announced, it’s unlikely Messier could rest secure that any separate transaction for Vivendi’s BSkyB shares would be fully valued, he explained.

“So, he won’t do anything just yet.”

(Bloomberg News contributed to this report.)

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