Is the Clock Ticking for Messier?


By Ronald Grover

The hottest betting action in Hollywood right now is the office pool at Universal Pictures. People aren't trying to pick how long Jennifer Lopez will stay married next time or how much The Fast and the Furious 2 will do at the box office minus erstwhile star Vin Diesel. No, the poolsters are putting their money down on how long the boss -- 45-year-old Jean-Marie Messier -- can hold on to his job as chairman of Vivendi Universal (V).

It's a sad day in the life of a movie studio when office gossip is generating the most buzz. But things aren't looking so good for the former investment banker-turned-media mogul. One top Universal exec tells me Messier won't make it through the summer. In my opinion, Messier would be wise to leave now (see BW, 7/1/02, "Messier on the Record: Settling into the Hot Seat").

A big part of the problem is that he hasn't just lost the confidence of people in-house but on the outside as well. A top film producer just asked me whether Universal was planning on cutting overhead to satisfy the parent company's cash needs -- which are great, thanks to Messier's buying spree. Slashing overhead is a death blow for any studio, as they live and prosper on their ability to provide cushy offices and quick and decisive distribution services to producers with potential hits. If Universal were to cut overhead, the producer told me his company would exercise an "out" in its agreement with Universal and hook up with another studio.

SEETHING SHAREHOLDERS. Odds are that, given enough time and support by his board, Messier could probably turn around the sagging fortunes of Vivendi, whose stock has fallen by 63% since the first of the year. After all, he could reduce the $30 billion in debt by selling off cable channel Canal+ or mobile-phone holding Cegetel.

The debt load is only part of the problem, though -- and maybe the easy part to fix. The bigger issue is that Messier seems to risk disaster nearly every time he opens his mouth. His credibility is zero on Wall Street. After promising to rein in his dealmaking ways, he promptly went out and paid big bucks for USA Network's TV holdings and Houghton Mifflin publishing company.

Shareholders are still seething over Messier's aborted attempt to hand out lavish stock options to executives. Then there was the $1.4 billion in off-balance-sheet debt that he disclosed last month, which sent Vivendi's debt rating to just a touch above junk status. None of this helps make a stock attractive.

But said a barely contrite Messier in a June 26 conference call to investors: "I have heard the uncertainties on the market relating to Vivendi Universal. I will consider our goal of regaining the confidence of the market has succeeded when you will have no more questions and we can cancel these calls."

CREATIVE TENSIONS. In a media company, the doings of the head honcho can have repercussions in the trenches where films and TV shows get made. That, after all, is a content company's bread and butter. Questions about Messier's longevity already have folks like my producer friend reconsidering whether they want to be associated with his company. You have to think that elsewhere up the chain, be it at Universal's music or TV group or its book unit, other creative types are wondering who'll be running the show next week.

Vivendi may be tops in water purification in France, but that doesn't carry a lot of weight with creative talent. And if Vivendi wants to be a content company, it has to be very concerned with what the creative people think of its top guy.

For years, top talent steered clear of Walt Disney (DIS) because they feared Chairman Michael Eisner, not his studio chiefs, was calling the shots. Years back, CBS was an also-ran because the talent didn't know if Larry Tisch was going to sell off the company at a moment's notice (which he eventually did).

Vivendi's creative honchos are first-rate -- Ron Meyer and Stacy Snider at the film unit, and Doug Morris and Jimmy Iovene at the music company. But producers and directors read newspapers, watch the tube, and think about their own futures. They like stability. They want to know that the guy with whom they sign on to make a film or soundtrack will stick around for a while. It helps ensure that the project gets done, and done the way it was agreed upon.

STOCK ACQUISITION? Messier, typically, seems less than worried. In the June 26 conference call he said, "I would be pleased, with the support of the board, shareholders, and stakeholders, to run the company for another 15 years." (Attempts to contact Messier for comment on June 28 were unsuccessful.)

I wouldn't bet on being around another 15 years if I were Messier. Word out of Paris these days is that the Bronfman family, which owns about 5% of the company, has had enough. Several board members, allied with the Charles Bronfman wing of the family, have pushed to oust Messier.

On June 28, Vivendi's stock suddenly jumped amid rumors that a group, at the urging of powerful French businessmen Claude Bebear, had accumulated 5% of the company and would soon oust Messier. Bebear, chairman of French insurance company Axa, is said to have met with one of Messier's fiercest critics, Bronfman-appointed boardmember Samuel Minzberg.

DILLER? NO DEAL. As for Edgar Bronfman Jr., the former Seagram chairman who sold that company to Messier, he's also thought to be scouting for a replacement. An oversight committee of board members, which Edgar co-chaired, seems unable to rein in Messier. Even after that committee was put in place, Messier made jaws drop with a maneuver to "rent" shares in the company's water unit to Deutsche Bank for $1.3 billion in a complex transaction that has the world thinking Vivendi is running out of money. Edgar Bronfman did not return calls for comment.

How much longer will Edgar and like-minded board members allow this to continue? One big stumbling block, given the French obsession with intrusion by foreigners, is that a Frenchman will likely be needed to run the company. That would seem to leave out Barry Diller, a great choice, but one who has said he doesn't covet Vivendi.

I'm not sure who they can get to take on this challenge. But the fact is, the current guy no longer has anyone's confidence. I think an ouster could happen as early as July 4th. Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BusinessWeek Online


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