French media giant Vivendi announces $10.3 billion deal with USA Networks Inc.

Monday, December 17th 2001, 12:00 am
By: News On 6

PARIS (AP) _ Vivendi Universal is buying the entertainment assets of USA Networks Inc. in a $10.3 billion deal to improve distribution of the French media giant's music and movies in the United States.

The deal announced Monday is the latest chapter in Vivendi's remarkable transformation in just a few years from a water utility into a global media and entertainment powerhouse.

Under the deal announced Monday, Vivendi will combine USA Networks' assets such as the USA and Sci-Fi cable channels and the TV production operation responsible for ``Law and Order'' and ``Jerry Springer, with its own Hollywood-based Universal Studios.

Universal has a huge film catalogue and its Universal Studios last year produced hits like ``How the Grinch Stole Christmas'' and ``Erin Brokovich.''

For $10.3 billion in cash and stock, Vivendi will get a 93 percent stake in a new company that will be called Vivendi Universal Entertainment.

USA Networks' Barry Diller, the entertainment industry veteran who ran the Paramount movie studio in the 1970s and oversaw the launch of the Fox television network in the 1980s, will be chairman and chief executive of Vivendi Universal Entertainment.

Vivendi, which acquired Universal from Canada's Seagram a year ago, hopes that Diller can expand its presence in the United States to compete with the likes of AOL Time Warner, Walt Disney Co. and Viacom.

The deal follows Vivendi's agreement Friday to invest $1.5 billion in EchoStar Communications Corp., the second biggest U.S. satellite television service with about 6 million subscribers.

In a statement, Vivendi said the two deals ``fully address Vivendi Universal's needs in terms of integration and distribution on the US market.''

Universal Studios was previously paired-up with Canal Plus Groupe, the European pay-TV group, within the Vivendi Universal organization. The new deal raises the question of Canal Plus' future status within the group.

``At the end of just one year, following our merger with Seagram and Canal Plus, we have put the pieces together in fulfilling our strategy,'' Vivendi Chairman Jean-Marie Messier said in a statement. ``We have focused on integration and addressing our relative distribution weakness in the U.S.''

Vivendi will finance the deal by selling 314 million USA Network shares it already owns, as well as selling 32 million of its shares in exchange for part of Liberty Media Corp.'s stake in USA Networks.

Vivendi will pay another $1.6 billion in cash and $750 million in various deferred payments, the statement said.

A portion of the cash financing will be provided from proceeds of the sale two weeks ago of 9 percent of Vivendi Environment. Vivendi also divested 8 percent in British broadcaster BSkyB last week and is expected to cash in $8 billion from the sale of the beverage assets it acquired in the Seagram deal.

Liberty Media is to sell its 27 percent stake in cable TV company Multithematiques to Vivendi Universal for 5.2 million Vivendi Universal shares. That will give Liberty a 3.6 percent stake in Vivendi and make the U.S. company Vivendi's biggest institutional shareholder.

USA Networks produces TV shows and made-for-TV movies through Studios USA. It is selling the 13 television stations it owns to Univision, the Spanish language television company.