BUSINESSWEEK ONLINE : JUNE 26, 2000 ISSUE
INTERNATIONAL -- EUROPEAN COVER STORY Tapping into a Gold Mine at Seagram? (int'l edition) Are Jean-Marie Messier and Pierre Lescure ready for prime time? They'd better be. Messier, chief executive of French communications and utility group Vivendi (VVDIY), and Lescure, who heads Europe's No. 1 pay-TV company, Canal+, are in talks to merge with liquor and entertainment giant Seagram Co. (VO) If the deal goes through, the two Frenchmen could soon be running one of the world's biggest media conglomerates, including Seagram's Universal Studios and Universal Music Group. The merged company would have a market capitalization of $100 billion. Clearly, a Seagram deal would be a coup for Messier, the 43-year-old former investment banker who has pledged to make Vivendi ''one of the top communications groups of the Internet age.'' Messier could mine Universal's trove of film, TV, and music holdings for Vivendi's Internet ventures, such as Vizzavi, a Web portal it is launching this month with Vodafone AirTouch PLC. Canal+, which is 49% owned by Vivendi, could likewise tap the entertainment assets stored at Universal for its pay-TV channels, which broadcast in most European countries but rely heavily on French-produced content. And Lescure, who has long dreamed of making Canal+ a world-class film production house, would control one of the major Hollywood studios. Although details are still under discussion, Messier is expected to be named CEO of the merged group, tentatively named Vivendi Universal. Edgar Bronfman Jr., 45, president and CEO of Seagram, would be second-in-command, and Lescure, 54, would run the group's media holdings. French sources think that Seagram's liquor brands and theme-park holdings would probably be sold, and Vivendi would complete the planned spin-off of the company's utility holdings--creating a purely communications and media-focused business. ''Strategically, it's the right thing for Vivendi to do,'' says Matthias Knerr, European portfolio manager at Deutsche Asset Management in New York, who follows the company closely. But so far, investors are holding their applause. Vivendi shares fell 10% after the merger talks were confirmed on June 14, reflecting worries about the poor performance of Universal Pictures. It has strong cash flow and some new hits, but it has lost $121 million in the past nine months. ''Vivendi and Canal+ need to be sure they have the financial strength to take that on board,'' says Edouard Tetreau, an analyst at Credit Lyonnais in Paris. While Messier has won plaudits from many investors for turning around the once unprofitable Vivendi, he can claim no experience in the entertainment business. And foreign companies' forays into Hollywood have usually ended badly. If you doubt it, just ask Sony, which pulled out of Columbia Pictures, and Matsushita, which sold MCA (now Universal). Canal+ itself made a disastrous investment in Carolco Pictures, which went belly-up in 1995. IN CONTROL. Bronfman's role in the merged company is another question mark. The Bronfman family is likely to control an estimated 8% of shares--in contrast to Vivendi, where no shareholder now has more than 3%. But, says Knerr of Deutsche Asset Management, ''Messier is not the type of person to enter into a deal where he doesn't have control of the assets.'' Lescure, however, is likely to be given considerable autonomy in running the media operations. Messier and Lescure could be taking a big risk. But if their gambit succeeds, the merged company could be a global powerhouse. Already, Canal+ sends TV programming to 14 million European households. Soon, through the Vizzavi portal, Vivendi will have access to 70 million European cell-phone customers. And media mogul Rupert Murdoch is talking with Messier about taking a stake in Platco, Murdoch's planned global TV and Internet venture. Stay tuned--the show's only beginning. By Carol Matlack in Paris, with Ronald Grover in Los Angeles _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Deal Time at Seagram (int'l edition) EUROPEAN COVER IMAGE: Deal Time for Seagram TABLE: Seagram's New Mix TABLE: The House of Seagram Tapping into a Gold Mine at Seagram? (int'l edition) TABLE: Vivendi's Expanding Empire INTERACT E-Mail to Business Week Online

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