Vivendi rejig prompts share slump

Messier could face trouble after the share price plummets

Investors in French media giant Vivendi are running scared after the company unveiled yet another stage in its restructuring and rumours spread that a key Italian deal will fall through.

By the close of trading on Monday, Vivendi Universal's shares had fallen 5.70 euros or 23.3% to 18.75 euros, a slide of more than 70% since the start of this year and the lowest ebb of chief executive Jean-Marie Messier's six years at the helm.

During the day, trading in the shares had been suspended three times as sellers queued to bail out of the troubled company.

Meanwhile, the Cac-40, France's main blue-chip index of which Vivendi Universal is a key constituent, fell 130.29 to 3,669.24.

Remodelling

The trigger for Monday's panic was the announcement by Vivendi that it was selling 15.5% of its utilities arm, Vivendi Environnement, to help sort out the heavy debts handicapping the group.

The complex deal - involving numerous banks and a staggered selloff - would eventually see Mr Messier cede overall control of Environnement.

It would also cut debt by perhaps 1.7bn euros, as well as relieving Vivendi Universal of the need to carry Environnement's own 14bn euro debt load on its own balance sheet.

But even after the deal Universal's debts will top 17bn euros.

Investors took a long, hard look at Universal's plan and at Environnement's share price - well below its price on flotation in 2002 - and dumped shares of both companies. Vivendi Environnement ended the day down 11.5%.

Burden

Adding to the gloom was a report that the sale of Vivendi's Italian pay-TV arm, Telepiu, to Rupert Murdoch's News Corp was off.

If true, that would spell the end of a deal which should have knocked 1.2bn euros off Vivendi's debt.

And to make matters worse, Monday also brought forth British Telecom's announcement that it is hanging onto its 26% stake in French phone company Cegetel.

Vivendi badly wants control over Cegetel, because its current 44% stake is insufficient to allow it to tap Cegetel's cash to reinforce its own finances.

Playing the man

But beyond the news-driven reaction, investors say part of the problem is Mr Messier himself.

Tuesday is the appointed day for a board meeting, the first since the rumoured squashing of an attempt to oust Mr Messier by a US boardmember.

"Investors want Messier out, and they are willing to sell the shares to make it happen," one London-based fund manager said.

"I think this is the end of him."