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Vivendi: Cut price sales on cards
By CNN's Abid Ali
PARIS, France (CNN) -- Vivendi Universal Chief Executive Jean-Rene Fourtou could announce a cut price sale of assets on September 25 when the group outlines the findings of a strategic review to slash debt. The world's second-largest media company, which ousted its Jean-Marie Messier in a board room coup two months ago, is struggling with debts of about 19 billion euros racked up by Messier after a two-year multi-billion-euro spending spree to create a media group to rival AOL Time Warner [USA:AOL]. Analysts at Merrill Lynch expect the troubled French media group to sell its publishing assets, including Houghton Mifflin of the U.S., for between 3 billion and 4 billion euros. But the sale of Italian pay TV platform Telepiu to Rupert Murdoch's News Corp [USA:NWS] may raise about 1 billion euros, less than the original price of 1.5 billion euros. And the sale of Canal+ Technologies, the maker of encryption software for set-top boxes, could "generate around 200 million euros, down from the previously expected 300 million euros," said Merrill Lynch.
Fourtou has said the company would sell 10 billion euros of assets over the next two years. Vivendi [PAR:PEX] has won a crucial 3 billion euro loan from a group of 11 banks, which gives it six months of "breathing space" to implement its strategy to reduce debt. But interest rates on the loan are steep, analysts said. Without the loan, the company would have faced a cash crunch. Deutsche Bank -- one of its lenders -- had said the company could have been "declared bankrupt." The higher interest charges could be the banks way of encouraging the company too speed up the sale of assets and keeping it to it promises in the strategy update, one London-based analyst told CNN. Fourtou is likely to say the media conglomerate has no intention of selling its 44 stake in France's second-largest telecom group Cegetel. Vodafone [LSE:VOD], Europe's biggest mobile phone company, which has a stake in Cegetel, is keen to increase its holding in the business and is currently in talks with BT Group [LSE:BT], which owns 26 percent of Cegetel. (Full story) "We anticipate Vivendi will likely seek to retain its stake and overt time endeavour to increase this above 50 percent, in order to consolidate the cashflow," said Merrill Lynch, but the group is likely to be constrained in the short term due to existing debt levels of 18.6 billion euros.
Fourtou is also likely to keep the company's entertainment assets, which include Universal Music Group, movie studios Universal Studios and USA Network, "though at a reduced level of ownership with a minority stake offered to a strategic investor," the investment bank said. "An alternative could be to IPO (initial public offer) the assets and retain a controlling stake." Vivendi may indicate its intention to dispose of its remaining 41 percent stake in water utility Vivendi Environnement. But that could be delayed until December 2003 because of so-called "lock up" agreements. Investors will be hoping Fourtou can deliver a strategy that can stem the company's downward spiral. Vivendi's stock has fallen as much as 85 percent this year from a high of 64.40 euros. It has been as low as 8.62 euros in August and in midday Paris trading on Friday slipped 3.2 percent to 13.40 euros.
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