French toast Seagram

Vivendi, Canal Plus in $30 bil stock swap bid for Universal

French utilities giant Vivendi and its powerhouse media unit Canal Plus have made a joint stock-swap bid for Seagram Co. that would value the latter at more than $30 billion, or north of $70 a share. That’s a 32% premium over Seagram’s Tuesday closing price of $53 per share on the New York Stock Exchange.

Although no deal is in place, the French conglom is currently performing due diligence and a formal announcement of the negotiations is expected today.

The new company would be called Vivendi Universal and would be run by Vivendi chairman Jean-Marie Messier. Seagram chief executive Edgar Bronfman Jr. is expected to have a significant role in the new company, as well as board seats for himself and members of the Bronfman family.

Seagram’s wine and spirits group would likely be spun off by Vivendi, which is considering transforming itself into a pure media company through a reverse takeover by its Canal Plus subsid. Such a move would also involve divesting its environmental businesses.

The French conglom is eyeing Universal as a content provider for its distribution assets, which include Canal Plus’ mammoth European pay-TV operation as well as its new media activities, wireless communications and satellite platforms.

An acquisition by the French would portend massive changes in the Universal pantheon. Bronfman’s management team at the Hollywood studio has been in a holding pattern since the Universal TV deal with Barry Diller three years ago, while Universal topper Ron Meyer has expressed to friends his discomfort with his job.

While Vivendi, like other European powerhouses, is eager to build a steady flow of film product for its distribution pipelines, the pattern in takeovers such as this is for the new company to install a fresh slate of production executives — in this case, executives who are more accustomed to dealing with the French corporate bureaucracy than with Hollywood dealmakers.

Bronfman quietly put his company on the block earlier this year. While talks with News. Corp., Walt Disney Co. and Bertelsmann went nowhere, Vivendi and Canal Plus were strong contenders until those talks stalled in April (Daily Variety, April 18).

Among the issues that prevented a deal from going through was the fact that Vivendi then had no stock traded on the New York Stock Exchange. That sticking point will be resolved with two upcoming listings — one for Vivendi’s environmental division and another for its media holdings, which include Canal Plus.

The question of exactly what role Bronfman would play in the new organization has been another stumbling block, one that continues to loom large in the ongoing negotiations. Latest scenario has Bronfman playing the role of vice chairman in the new Gallic conglom.

Although sale negotiations began between Edgar Bronfman Jr. and Vivendi, the French conglom made a presentation to the Bronfman family several weeks ago that solidified their support.

Together, Vivendi, Canal Plus and Seagram are valued in excess of $100 billion, with revenues in the $65 billion range and combined outstanding shares of 436 million.

In addition to holding a 49% stake in Canal Plus, Vivendi also owns 24.9% of British-based satcaster BSkyB.

Seagram holds a 45% stake in Diller’s USA Networks, which includes film division USA Films.

In April 1995, Bronfman purchased 80% of U parent MCA for $5.7 billion cash — about 15 times cash flow.

Analysts felt that Seagram was overpaying for MCA and the Seagram stock immediately slipped 17%. At the time, Japanese conglom Matsushita reduced its stake in Universal to 20%. It is unclear whether Matsushita will retain its current stake, which is now 8%, in the new deal.

Seagram finalized its $10.4 billion acquisition of record giant PolyGram in December 1998 and simultaneously decided to merge the remaining assets of PolyGram Filmed Entertainment into Universal Studios.

The most stunning result of this acquisition was the creation of the world’s largest music conglom, Universal Music Group.

Barry Hyman, a media analyst with Gotham’s Ehrenkrantz King Nussbaum, told Daily Variety he valued Seagram assets at $72 a share, representing a 35% premium to Seagram’s closing stock price of $53. Seagram’s stock price had been under $30 several years ago.

Hyman estimated the value of Seagram’s entertainment assets at $25.3 billion-$27.6 billion, with the liquor group valued at between $4.3 billion-$5.2 billion.

“Edgar walks away from this looking very good,” Hyman said. “It’s a good deal for the Bronfman family and for Seagram shareholders.”

The analyst said the deal reflects the increased pressure media companies feel to combine in the wake of January’s announcement that America Online would buy Time Warner.

“The AOL deal put a faster focus on the need to put content and delivery together,” he said. “That deal was really a wake-up call to the way the business model has to look.”

Hyman said the deal also reflects a growing desire by European conglomerates to play a greater role in worldwide media companies.

“Regardless of short-term fundamentals, there will always be a buyer for media properties,” he said. “This is an industry built on turnovers and acquisition.”

Seagram reps declined comment.

Jill Goldsmith in New York and Dave McNary and Charles Lyons contributed to this report.

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