French co. claims action is a negotiating ploy
PARIS — Vivendi Universal’s share price took a fresh battering on the stock market Monday, losing 6% in New York on investor jitters over a fraud lawsuit against the beleaguered conglom filed last week by Liberty Media.
Viv U said it was “surprised” and “astonished” by the “baseless” action, which it claimed was a negotiating ploy by Liberty, one of the companies eyeing its U.S. media assets.
“Vivendi Universal considers that Liberty Media’s real motivation was to bring pressure to bear on discussions,” the statement read.
But skepticism is mounting among nervous investors.
The Liberty Media action is the fourth suit accusing Viv U’s previous management of glossing over its precarious finances. The SEC and French equivalent the COB are also probing.
“Filing yet another suit simply increases the risk that one could succeed,” Mark Harrington, media analyst with Bear Stearns in London, told Daily Variety on Monday. “From a valuation perspective, the downside is unlimited. At worst it could result in a significant financial penalty which could exceed the value of the company as it stands.”
In the action brought last week, Liberty claims Viv U concealed the true state of its finances while negotiating the exchange of Viv U shares for most of Liberty’s stake in USA Networks. Deal gave Liberty a 3% stake in Viv U. The conglom’s share price has since fallen by two thirds.
Liberty has asked a Manhattan federal court judge to void the sale.
The action comes at a critical time for Viv U, which despite a flurry of billion-dollar asset sales recently announced the biggest loss in French corporate history. To avoid a cash crunch, it is selling $1 billion in seven-year bonds and secured a $2.5 billion credit line last week.
But the group insisted the Liberty suit would not undermine its “determination to rapidly improve its financial situation.”
“Vivendi Universal remains on track to return to an investment-grade credit profile within the next 12 to 18 months,” the company said.
In New York Viv U shares closed down 85¢ to $13.40.