Posted on: Monday, December 17, 2001
Vivendi of Paris gets USA Network
By David Lieberman
USA Today
NEW YORK — Paris-based Vivendi Universal will storm U.S. entertainment today with a startling deal that will make it a major domestic television power.
It has agreed to pay $10.5 billion in stock and cash for the cable channels and production operation of USA Networks, according to a source close to the deal. Barry Diller, chief executive officer of USA, will continue to run the TV unit as well as Universal's movie studio and theme parks, reporting to Vivendi CEO Jean-Marie Messier.
The agreement opens the way for Vivendi to coordinate Universal's films and theme parks with USA's TV production unit, which has TV dramas, including "Law & Order," "The Agency "and "The District."
Their programming could then run on cable's general entertainment USA Network, the Sci-Fi Channel and Trio.
These assets will be part of a new subsidiary. Vivendi will own 93 percent, USA 5.5 percent and Diller about 1.5 percent.
Vivendi will pay for the deal by giving the 44 percent of USA that it already owns, valued at $7 billion, back to the company. It also will pay $1.6 billion in cash. In addition, Vivendi will swap shares with John Malone's Liberty Media, which owns 21 percent of USA. That will leave Malone with 3.5 percent of Vivendi.
Diller's presence is sure to make investors take notice of Vivendi, whose stock has underperformed the market this year.
His agreement to report to Messier also represents a change of heart. Diller has repeatedly said that he never wanted to work for anyone else.
But Diller, who'll be paid a percentage of the profits, will not have a fixed term at the company. He could leave, or be fired, at any time.
To ensure stability at Universal, Chairwoman Stacey Snider and President Ron Meyer extended their contracts for five years. They've ended years of turmoil with a string of hits, including "The Mummy Returns."
Diller would not oversee Vivendi's Universal Music or its French cable channels. But he will continue to run USA's e-commerce properties, including the Home Shopping Network and TicketMaster. They will remain in a separate company in which Vivendi will have a 12 percent stake and warrants for another 12 percent.
Diller will instantly have a big assignment at Vivendi.
Messier unveiled a wide-ranging alliance Friday with EchoStar, which expects to launch five Vivendi-created channels next fall.
Vivendi will pay $1.5 billion for 10 percent of EchoStar — or 5 percent of the new satellite giant that would be created if EchoStar merges with DirecTV.
If the deal goes through, 17 million satellite subscribers would be able to watch new Vivendi services.
The deals reflect "a strategic resource shuffle" for Vivendi, says Pete Winkler of PricewaterhouseCoopers, a consultant for the company. "They're changing their focus from Europe to the U.S. This is the biggest media market in the world. And they're trying to spread out their bets."
