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Viv U, USAI edging apart

Diller co. buying $407.4 mil worth of shares

NEW YORK — Vivendi Universal is one step closer to unwinding its constrained and complex marriage to Barry Diller’s USA Interactive as the Gallic firm announced late Friday an agreement to sell some 30 million warrants in USAI to the interactive services company.

Under the transaction, Diller’s company will pay Viv U $407.4 million to buy back two tranches of warrants to purchase its own shares at $32.50 and $37.50 per share, respectively.

The proceeds will help Viv U take another large chunk out of its debt pile, which stood at €12.3 billion ($14.4 billion) in December.

USAI’s share price fell 3.4% to $37.17 on Friday.

The two companies are still intertwined — Vivendi owns 56.6 million USAI shares (equivalent to an 11% stake), while USAI retains its preferred shares in the Vivendi Universal Entertainment unit. But by removing Viv U’s rights to increase its stake in USAI at a discount, Viv U says it will be able to sell its stake in USAI (presumably as part of a sale of its entertainment assets) without the consent of Diller or John Malone’s Liberty Media.

But Viv U or an affiliate is obliged to hold those 56.6 million USA shares until May 2022, the date USAI’s preferred shares in Viv U Entertainment can be redeemed. Diller, however, retains proxy voting rights over Viv U’s stake in his company.

Vivendi picked up the warrants last year as part of its acquisition of USA Network and Sci Fi Channel.

USAI is currently suing Viv U over a disputed $620 million tax payment, and Diller has asserted that his company could veto the sale of certain Viv U assets.

Diller’s intentions regarding Viv U Entertainment have been unclear — he has insisted he has no interest in owning the assets but only wants to monetize his position at the highest value possible — though his 20% shareholder John Malone’s Liberty Media has been somewhat more aggressive in looking to parlay the companies’ complex interrelationship into a deal to acquire VUE. (Liberty has its own lawsuit against Viv U filed asserting improper financial disclosures.)

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