Vivendi Universal is close to selling its 50 per cent stake in the Vizzavi internet portal to Vodafone. The move would see the cash-strapped French media group move back closer to its roots as a utility-focused conglomerate.
The sale of Vizzavi, for a sum insiders said would be unlikely to exceed €150 million, would be a small step towards the target of new chief executive Jean-Rene Fourtou of realising €10 billion from disposals.
"Vivendi is trying to figure out its strategy. It needs to sell assets but can't be left with a mix of assets that don't make sense," said one observer, pointing to the company's signal that regaining a majority stake in Vivendi Environnement was one of three strategic options under consideration.
"If you look at who is now running the show, they are people who are going to be most convincing running a French utility company." Mr Fourtou wrote to employees on Sunday, reassuring them that he had "identified the means to get out of this crisis and the paths to put things right".
Vivendi Universal's shares yesterday rallied over 20 per cent after a fall of more than 45 per cent in the past three trading days that followed savage downgrades to the group's credit ratings and increasing speculation over the risk of default.
Mr Fourtou last week announced the sale of Houghton Mifflin, the US publisher acquired last year for $2.2 billion.
Bankers said Vivendi Universal could achieve its interim objective of raising €5 billion within nine months without selling any other core US media assets.
Other deals that could be concluded rapidly include the sale to News Corporation of Telepiu, Canal Plus's Italian business, for €1 billion-€1.3 billion; the sale of shares in a restructured Canal Plus in France that could be worth €2 billion; and the disposal of a 10 per cent stake in US pay-television operator EchoStar.
Vizzavi was co-founded in January 2000 with a €1.6 billion investment plan that made it one of the most expensive start-ups in internet history.
Vivendi Universal reaffirmed on Wednesday that it would not play any part in funding the additional €600 million earmarked for the expansion of the portal.
The sale of the Vizzavi holding would play a more significant part in staunching cash consumption. Investment to date exceeds €1 billion. It lost €400 million last year, but is performing to plan, according to Vodafone, and should reach break-even next year.
"If Vivendi Universal is not able or willing to meet its share of the funding, then Vodafone has to consider acquiring all or part of their shareholding," said one adviser to Vodafone yesterday.
"Although analysts value it as zero, Vodafone would not be entering these discussions if they were just going to close it down."
The recovery in Vivendi's stock also owed something to investors simply buying back the stock after last week's selling blitz that lopped some seven billion euros off Vivendi's market capitalisation.
"Vivendi is a lottery," said a senior equity salesman in Paris. "Fourtou's comments have given people a reason to snatch back the stock after last week's hammering," a trader said.
"The tone of the message suggests Vivendi is positive it will secure funding, and that is the key event that needs to take place to resolve the short-term crisis," said Mark Harrington, media analyst at JP Morgan.
"The Vizzavi deal is not hugely important because it isn't worth much, but it is obviously helping the stock since it's a sign management is getting on with asset sales," said one Paris-based trader.
But analysts said Fourtou's soothing words would provide only temporary respite for the stock, and that promises to sort out the indebted firm's balance sheet were no longer enough.
"We need actions, not words... and that means asset sales.
"The longer we wait, the higher the risk that Vivendi will enter into a default scenario," Mr Harrington added.
- (Financial Times/Reuters)
