MEDIA: The schadenfreude in Paris is palpable. The man who told the world at Christmas that the French cultural exception was "dead" has come a cropper.
Mr Jean-Marie Messier, chief executive of Vivendi Universal, last week turned in the largest loss in French corporate history. A €16 billion write-off to the book value of acquisitions made at the height of the internet boom pushed the media and environmental services group into a €14 billion loss. The highest flyer of a new generation of French businessmen has crashed to earth amid charges of massive value destruction.
It all looked so different in June 2000. At a stroke, Mr Messier put France back on the map of the US-dominated media industry with a double-barrelled deal of awesome ambition.
Storming into Hollywood, he paid $34 billion (€39 billion) for Seagram, owner of Universal film and music. Back home, he stumped up €12.5 billion to seize Canal Plus, the pay-TV operator that also bankrolls 80 per cent of all French films.
Even President Jacques Chirac offered his congratulations. For a country ever anxious about its place on the world stage, the then 43-year-old Mr Messier became a symbol of a youthful France embracing change and ready to challenge US cultural dominance.
Mr Messier's autobiography, J6M.com, casts him as apostle and seer of the internet in Europe. Endlessly photographed in Paris Match, notorious for his $17.5 million apartment on Park Avenue and the frequent target of jibes from rivals, he has become the highest-profile businessman France has ever known.
J6M.com tells of his modest upbringing in provincial Grenoble. A handicapped sister died young. His father was a chartered accountant; his grandfather was driver to the local prefect.
"Our family climbed the social ladder in two generations. That's why I don't believe people who say it's broken down," he says.
After the elite Ecole Nationale d'Administration and a spell working on privatisations for Edouard Balladur, then France's finance minister, the 29-year-old Mr Messier became Lazard's youngest partner. Eight years later, he was asked to clean up the scandal-ridden Générale des Eaux. He renamed it Vivendi and set a course for Hollywood.
His high media profile seems to be deliberate. Showbiz likes its executives to be larger than life. But it is also because in a company whose shape is forever changing - he has spent about €100 billion on acquisitions since 1996 and also sold much - Mr Messier provides a much-needed point of reference. An investment in Vivendi is largely one in Mr Messier. The higher Vivendi's shares soared - in March 2000 they touched €141, three times their level today - the more faith investors placed in his alchemy in turning a sewage treatment business into silver-screen gold.
Even as the gloss left the Vivendi share price last year, Mr Messier continued to cut deals. He paid $2.2 billion for Houghton Mifflin, the publisher; $372 million for MP3.com, the music website; $10.8 billion for two cable networks belonging to media executive Barry Diller; €2.3 billion for a 35 per cent stake in Maroc Telecom; and $1.5 billion for a 10 per cent stake in EchoStar, a US pay-TV operator.
However, debt mounted to $33 billion, while Vivendi's plunging shares testified to dwindling confidence in his deal-making skills.
Vivendi has underperformed Disney, AOL-Time Warner and Viacom by 52 per cent, 33 per cent and 64 per cent respectively over the past 24 months.
In Paris, Mr Messier puzzled many last week by suggesting that in using shares to pay for most of these acquisitions, he had avoided destroying value.
Ms Grace Fan, a media analyst at Bank of America, says: "That's completely wrong, of course. We're a long way from seeing Vivendi Universal earn its cost of capital. I expect \ to earn a return on capital of around 3.5 per cent this year, rising to only 7.5 per cent by 2005."
Mr Messier now says the comment was for unsophisticated retail investors only. But it has renewed concern that his deal-making has been allowed to get out of control. Some observe that Vivendi's board seems cosily Franco-French: Serge Tchuruk, chairman of Alcatel; Bernard Arnault, chairman of LVMH; Jean-Louis Beffa, chairman of St. Gobain; and Rene Thomas, honorary chairman and director of BNP Paribas, all sit on his board and he in turn sits on theirs.
Mr Messier's only concession was an admission that the purchase of Canal Plus had yet to prove a success. Many see this as something of an understatement, given Canal's $500 million loss at the operating free cashflow level and Mr Messier's decision to write off €6 billion from its book value. This represents roughly half the amount he paid just 22 months ago. He has given its management two years to turn the business around.
With his credibility dented, the question now is whether Mr Messier can recover his poise in time to stop the media conglomerate from falling apart as rapidly as it was put together. In its current shape, leaving aside the question of its 63 per cent stake in a world- leading water business, analysts view Vivendi as an odd-looking animal.
Tacked on to Universal film and music, a mature global content business, is a patchy network of media distribution platforms, stakes in pay TV, mobile telecommunications and satellite TV.
But Mr Messier still has many admirers. Furthermore, the sheer scale of the charge taken this week should mean Vivendi Universal is through the worst. Mr Messier is moving fast to pre-empt demands for a break-up of the group. Transparency is improving, even though Vivendi published no balance sheet with its results. The environmental arm is likely to be deconsolidated soon. The small telecoms operation is seen as non-core in the medium term. And the future of Canal Plus is under scrutiny.
If Mr Messier's determination is any indication, the schadenfreude in Paris will not last long.
