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Vivendi ties up Seagram
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June 20, 2000: 6:26 a.m. ET
French giant links Canadian firm and Canal Plus in $46B three-way deal
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LONDON (CNNfn) - French conglomerate Vivendi cemented its move into the world of digital media Tuesday, agreeing a three-way deal worth more than $46 billion in stock and debt, dominated by the purchase of Canadian entertainment and drinks company Seagram Co.
The deal, which will create the world's second-largest media company, will also see Vivendi buy the 51 percent of pay-TV affiliate Canal Plus that it doesn't yet own. It's all part of Vivendi Chairman Jean-Marie Messier's plan to deliver content - especially the assets of Seagram's world-leading Universal Music Group - across the French company's web of telecommunication systems.
But investors battered the two French companies' shares after the announcement Tuesday. Vivendi (PEX) tumbled 9.2 percent to  87.60, indicating possible concern that it might be overpaying. Canal Plus (PAN) plummeted 10 percent to 182.70, and its shares were suspended limit-down, after Vivendi pitched its offer for the outstanding stock below the broadcaster's closing price Monday.
Shares of Seagram, which have risen sharply in recent days amid reports of the pending deal, rose another 2-9/16 to 64 on Monday.
The new company, dubbed Vivendi Universal, will own businesses ranging from film and music studios to European pay-TV channels, electronic media, wireless telecommunications and theme parks. Vivendi plans to divest its traditional mainstay, its water utility operation, as well as Seagram's original core, the liquor and wine business.
Vivendi Universal will have combined revenues of roughly $55 billion and earnings before interest, taxes, depreciation and amortization of about $7 billion, the companies said in a statement.
"In the home, on TV or PC, and out of the home at the cinema, on a mobile, or on a [personal digital assistant], our outstanding combination of creative and premium content can be delivered seamlessly to our customers and subscribers," said Pierre Lescure, CEO of Canal Plus, in a statement.
Trading beneath the collar
Vivendi said it would offer stock designed to represent a price of $77.35 per Seagram share, or about $34 billion in total. But it will vary the amount of its own stock in the offer depending on the Vivendi share price, with the exchange ratio fluctuating between 0.8 and 0.622 Vivendi shares for each Seagram share.
The higher ratio will kick in if the value of Vivendi stock falls below $96.69 - and Tuesday morning in Paris, its shares were worth $83.80 each. That's equal to about $67 per Seagram share, or about $29.5 billion in total.
At the other end of the range in the so-called "collar" mechanism, the French company would cut its offer to 0.622 of its shares per Seagram share, if Vivendi's stock trades above US$124.30.
Vivendi will also take on about $6 billion in Seagram debt.
Meanwhile, Vivendi said it would offer two of its own shares for every share  of Canal Plus, Europe's largest pay-TV provider, that it does not already own - a bid of about 11.2 billion ($10.8 billion) for the 51 percent stake, which implies a value of 22.1 billion for the whole of Canal Plus. The company is virtually debt-free, sources said.
Partial Canal Plus divestment
As part of the deal, Vivendi will absorb Canal Plus's film studio, Internet business and the pay-TV units outside France, but will divest its French pay-TV business, which will be taken public to comply with French laws governing the ownership of broadcasting assets.
The transaction will give Seagram five seats on the Vivendi Universal board while Vivendi will occupy 14 seats. Messier will be chairman and CEO, while Edgar Bronfman Jr., CEO of Seagram,  whose grandfather built Seagram into a giant liquor company, will be vice chairman and head of its music business.
Industry watchers said the wave of worldwide consolidation in the media business was not over yet.
"Great content is scarce and broadband distribution platforms are scarce," Theresa Wise, a media strategist at Andersen Consulting, told CNNfn. "We can see more deals like this coming together to provide content for the Internet and digital TV."
In the worldwide media industry, Vivendi Universal would be second in size only to the planned AOL Time Warner, the company set to be formed by the merger of America Online and Time Warner, the parent of CNNfn.com. 
--from staff and wire reports
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