Diller parlez Vivendi

Deal frees up USA Net chief

NEW YORK — Barry Diller may finally get to do the big deals after all.

His USA Networks stock jumped Wednesday and execs there were in high spirits as a likely merger between Seagram Co. and Vivendi held out promise that Diller could, at last, get Edgar Bronfman Jr. off his back.

The once cordial relationship between the two had soured after the Seagram CEO put the kibosh on Diller’s big ticket ideas, like the purchase of NBC.

“This is great for USA. Diller likes Vivendi, and Vivendi wants to grow,” insisted one insider.

“The story of USA is a company with good management, good assets and one arm tied behind its back,” said another.

Seagram owns about 45% of USA Networks, which was created in 1997 when Bronfman sold most of Universal Studios’ TV assets, including the USA and Sci Fi cable networks, to Diller’s company.

The spirits-and-entertainment conglomerate has worried about a big stock purchase diluting its controlling stake in USA. Vivendi’s greater size and scale make dilution less of an issue.

And naturally, the agenda of a group that’s shopping itself around, like Seagram of late, is very different from one that is buying and building, a la Vivendi.

Talks confirmed

Seagram confirmed Wednesday that it is in merger talks with the French giant, which owns 49% of TV powerhouse Canal Plus. The agreement won’t be official for a week or two, as final details are hashed out.

But most observers expect the $30-plus billion, all-stock deal to close and say that a counter-offer for Seagram is unlikely.

The company had reportedly held discussions with News Corp., Sony, Walt Disney and others about possible partnerships.

Diller’s contract with Seagram, which Vivendi would inherit intact, stipulates that he can run USA Networks’ day-to-day operations unencumbered for as long as he wishes and he has the right to vote Seagram’s stock in shareholder votes.

The sticking point is that Seagram can veto any deal over a certain amount — to be precise, anything that’s more than 10% of USA’s roughly $16 billion market capitalization.

That’s $1.6 billion, a nice sum but small potatoes in a world of mega-mergers like CBS-Viacom and AOL-Time Warner.

“Investors were looking at USA Networks and seeing the world move away from it. It lacked global clout,” said one Wall Streeter.

On Wednesday, investors yanked USA stock up more than 11% to $21.25.

Seagram shares climbed more than 13%, to $60.12.

More autonomy

John Malone’s Liberty Media is also a major USA shareholder with the same veto power as Seagram.

But Malone rarely interferes, an attitude that USA Network insiders are optimistic Vivendi topper Jean-Marie Messier will adopt.

Messier and Diller apparently met last week and things went well. It’s not clear whether Diller will be able to officially tinker with the fine print to get himself more autonomy or just hope and pressure for a more hands-off regime.

Strategically, the deal is also a good one for USA, giving it access to two strong European companies: Vivendi and Canal Plus.

Rampant speculation even has Diller presiding over a French-owned Universal Studios reunited with its severed television operations — despite the fact that Diller has indicated he’s not interested in jumping into the major Hollywood studio game.

Just who would run Universal in the event of a Seagram-Vivendi merger is a question — along with the host of others that are giving showbiz and Wall Street types much to chew on.

One industry player cautioned that unless Diller is given contractual autonomy with respect to acquisitions, relations with Messier, a tough and involved CEO, could sour just as they did with Bronfman: “Barry Diller wants to be his own boss.”

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