In the new golden age of media mergers, another 800-pound gorilla is about to be unleashed. And this one speaks French.
Seagram Co. and Vivendi are hashing out final details of the takeover that will create an international media giant along the lines of an AOL-Time Warner, a Viacom-CBS or a News Corp. The parties could wrap up all the loose ends by the end of the month.
The deal, valued at about $33 billion, pairs Universal Studios with Vivendi and Canal Plus. A huge pay TV operator and content provider, Canal is one of the world’s biggest purchasers of movies and also boasts a gargantuan film library.
Seagram’s mammoth Universal Music Group will fit beautifully with Vivendi’s expanding wireless and Internet strategy, centered on a new European portal called Vizzavi, a venture with the U.K.’s Vodafone Airtouch.
The service will work from devices like cellular telephones, digital TVs and electronic organizers plus traditional PCs and is set to launch with 80 million subscribers from day one, culled from the partners’ existing digital customers.
Atop the mountain of assets sits Vivendi chairman Jean-Marie Messier, an energetic, pragmatic and hands-on former investment banker who has transformed the industrial conglom into a media and communications powerhouse. He’s just itching to get his hands on Universal Music.
The company will be called Vivendi Universal and its head office will be in Paris.
Seagram CEO Edgar Bronfman Jr. will likely serve as vice chairman. At 45, he is only 18 months older than Messier; the two first met in Paris, over breakfast last fall, brought together by Universal TV chairman Blair Westlake. They cemented the relationship in New York early this year at the Four Seasons and have been negotiating the current deal in earnest since April.
Bronfman wreaked a similar transformation at Seagram, taking the reins from Edgar Sr. when Seagram’s crown jewels were a beverage business and a big stake in a chemical company.
In 1994, he sold Seagram’s DuPont stake and bought MCA. In late 1997 he bought music giant Polygram. Along the way, Bronfman was always easy game for critics who dismissed him as a playboy with zero CEO qualifications save a fortunate gene pool.
Sentiment shifted slowly as Wall Street applauded Bronfman’s bold jump into music. But the stock performance was sporadic.
And for every comment last week praising the Vivendi deal as a brilliant coup, another called it a narrow escape. Despite the lofty title, Wall Street and industry insiders don’t expect him to actively run any Vivendi business except perhaps music.
Bronfman certainly lacked a golden touch in Hollywood and has been blamed for crippling Universal under a revolving door of managers.
Still, Seagram will exit with an overall value close to $40 billion compared with the $15 billion when Edgar Jr. succeeded his father as CEO in 1994.
After Japanese and Canadian owners, the studio will now pass to the French, but will be run by Americans, Messier has promised. That might help avoid cultural clashes that can plague trans-Atlantic deals.
The partners plan to sell or spin off what remains of their non-entertainment assets after the merger, whose precise configuration is still hazy but is likely to consist of a three-way merger of Vivendi, Canal Plus and Seagram. Members of the Bronfman family may be considering buying back the historic wine and spirits operation.
One big question is what happens to the deal itself if Vivendi shares continue a free fall on the French stock market.
A continued downward trajectory could certainly imperil the all-stock merger, Wall Streeters say, noting that the dip would have been avoided or at least postponed if the agreement hadn’t been leaked to the press a good week or two before it was ready to be officially announced.
Seagram’s side blames the French, but just look at the beating Vivendi has taken. And the heads-up certainly alerted any other potential bidders out there for Seagram to move. So far none has emerged and a counteroffer is considered highly unlikely.
Vivendi shareholders know Hollywood is a risky business. And they’re protesting the hefty pricetag, said to be in the mid-$70 a share range, for Seagram — whose stock was trading at $53 before news of the deal broke.
The shares had moved into the $60s earlier this year for a time after months of takeover speculation. Initially, Bronfman had been seeking $100 a share, a demand that all but scuttled the talks on several occasions.
A painful bruising by financial markets is not unusual for a company looking to becoming a huge international conglomerate. Ask AOL, whose stock took a nosedive after it announced plans to acquire Time Warner. (That deal is expected to close this fall.)
When the dust settles, the Bronfmans will own about 8% of Vivendi Universal, making them the merged company’s largest shareholders. Three Bronfmans will sit on Seagram’s 18-member board along with two other Seagram execs.
The family is pushing to exchange its Seagram stock for special preferred shares of Vivendi that would throw off hefty dividends. There are whispers that the younger generation of Bronfmans could use the cash.
Other requests: “More French films,” says one U.S. industry exec. “Any deal that brings Catherine Deneuve over here is fine by me.”