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Vivendi nabs sat stakes for Pathe merger

Canal Plus, BSkyB move closer

PARIS — French services and communications giant Vivendi is set to acquire a 17% stake in Rupert Murdoch’s BSkyB, and 20% of Gallic digital platform Canal Satellite, under a complex deal that will see it merge with Jerome Seydoux’s Pathe group.

Given that Vivendi already controls Canal Plus, the move once again raises the possibility of a merger between Canal Plus and BSkyB, to create a European media giant rivaling the Kirch/Mediaset axis.

Canal Plus and BSkyB are two of Europe’s biggest media companies, and their pay TV networks are key buyers of studio product.

In Pathe’s hands

The BSkyB and Canal Satellite stakes are currently in the hands of Pathe. Vivendi chairman Jean-Marie Messier said Monday that he plans to transfer Pathe’s 20% stake in Canal Satellite to Canal Plus. That would mean Canal Plus would control 90% of the digital platform, just when it is due to break even.

If the deal goes through, Seydoux, who is currently chairman of Pathe, will step down from the post.

The move, which was announced in Paris on Monday, will clarify a complex shareholder situation involving Vivendi, Pathe and Canal Plus.

Under the terms of the merger deal, the Seydoux family holding company Fornier, Pathe’s biggest backer, will get a 2% stake in Vivendi worth around $793 million.

Pathe name reassumed

Fornier will pay Vivendi $539 million to buy back Pathe’s film and thematic channel interests, which include production operations in the U.K. and France, theatrical distribution interests in France, the U.K. and Germany, and exhibition ventures in France and the Netherlands. Seydoux also will take back stakes in newspaper Liberation and soccer club Olympique Lyon. Fornier then will reassume the name Pathe, although the company will no longer be listed on the French stock exchange.

“This basically means that Jerome Seydoux keeps those businesses in which he has an operating interest, while Vivendi gets the stakes in BSkyB and Canal Satellite,” commented a source close to Seydoux, who added that Seydoux is expected to maintain his Vivendi shares, at least for the midterm.

Canal closure

For Canal Plus chairman Pierre Lescure, the agreement between Vivendi and Pathe closes a potential crack in his empire.

In January, French terrestrial network TF1 took a surprise 9% stake in Pathe. Most observers believed that TF1 wanted to up that position to gain access to Canal Satellite. (TF1 is a backer of a rival digital operation Television Par Satellite.) But Vivendi/Canal Plus blocked the move by upping its stake in Pathe to 29%. “Now, nobody’s going to get into Canal Satellite via Pathe,” noted an informed source after Monday’s merger announcement.

As for BSkyB, preliminary talks to merge Canal Plus with the British pay television and digital broadcaster, started — and finished — in March, torpedoed by a combination of political opposition in France and an apparent unwillingness on the part of BSkyB to leave management of the new entity in the hands of the French.

Merging the two pay television groups would create an entity controlling around 75% of Europe’s pay-TV market, which is currently worth around $10 billion in revenue a year, but expected to double within six years. As of March, BSkyB’s market capitalization was $14 billion and Canal Plus’ $9 billion.

Vivendi owns 34% of Canal Plus. On Monday, Messier left the door wide open on the question of restarting talks between BSkyB and Canal Plus, saying Vivendi’s arrival in BSkyB’s shareholder lineup “offered a wide range of possibilities.”

(Benedict Carver in Los Angeles contributed to this report.)

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