Murdoch in $1bn Vivendi deal

Murdoch: Looking to expand his pay-TV empire in Italy

LONDON, England -- Rupert Murdoch's News Corp buried hostilities with Franco-American rival Vivendi Universal on Saturday and agreed a preliminary deal to buy its Italian pay-TV operator for one billion euros ($946 million).

After a tense few months between the less-than-friendly media giants, News Corp said the two sides would postpone all litigation between their units as part of the "memorandum of understanding" and withdraw their lawsuits if the deal closes.

Murdoch, who signed the agreement with Vivendi executives in London on Saturday, plans to merge Vivendi's Telepiu with News Corp's smaller Italian pay television operator Stream to stem huge losses after a damaging battle for subscribers.

The sale of Vivendi's pay television operation in Italy to News Corp should be a win-win situation for the heads of both media giants.

News Corp's Rupert Murdoch gets greater access to a tough market. Vivendi's Jean-Marie Messier gets much-needed cash to help pay off his huge debt.

News Corp said in a statement that on completion, Vivendi would also receive 500 million euros in reimbursements. In a separate statement, Vivendi said the deal would end up reducing its debt pile by 1.2 billion euros, including 750 million euros in cash.

Having seen two previous Italian deals with Vivendi collapse, News Corp said the deal was subject to conditions including agreement from its existing Italian partner Telecom Italia, due diligence and regulatory approval.

News Corp said it would take 50 percent of the combined Telepiu/Stream platform and its 2.35 million subscribers. It was not immediately clear who would own the remaining 50 percent but sources familiar with the talks said on Friday other investors were being recruited and may include Telecom Italia.

The one billion euro price tag includes 450 million in cash paid on completion, with the remainder payable over five years.

Messier: Needs to sell assets to pay off Vivendi's debt

In slightly conflicting statements, News Corp said the deal valued Telepiu's subscribers at the same price agreed in an earlier deal to sell Stream to Vivendi -- or $600 according to comments made by Vivendi CEO Jean Marie Messier last year.

However, Vivendi said it was receiving $1,000 per Telepiu subscriber -- a figure which includes the reimbursements for future Italian Serie A soccer broadcast rights and the sale of two terrestrial licenses upon completion of their sale.

Nevertheless, the two sides are burying their grudges and said they would withdraw ongoing litigation if the deal reaches completion. Most notably, that litigation includes a lawsuit filed by Vivendi's television arm Canal Plus against News Corp's software arm NDS, accusing NDS of trying to undermine its Paris-based rival by encouraging piracy.

Reuters figures show Telepiu is the bigger of Italy's two pay-TV operators but lost 220 million euros in 2000. Stream by comparison has around 800,000 subscribers and lost 400 million euros in 2000 plus a similar amount last year.

News Corp has long sought a bigger role in Italy but years of discussions with media baron and prime minister Silvio Berlusconi had failed to lead to a significant deal.

Meanwhile, Vivendi's embattled chief Jean-Marie Messier has been under pressure to sell off assets such as Telepiu as he struggled to cut a huge debt pile and soothe anxious investors.

At the start of a long saga, News Corp. and Vivendi originally agreed to merge Stream and Telepiu but Italian authorities made clear they would not put up with the two global media groups joining forces in Italy.

Vivendi then agreed to buy Stream, but pulled out after Italian authorities attached conditions to the deal.

News Corp said on Saturday it would ask anti-trust authorities to approve the transaction under the same regulatory conditions imposed on that deal.