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Robert Boyle, PWC
"Overall it will be a French control"
 real 28k

Tuesday, 20 June, 2000, 16:32 GMT 17:32 UK
Vivendi buys Seagram
Gladiator film scene
Seagram's Universal Studios boasts content such as Gladiator
The French media and utilities company Vivendi has completed its deal to buy Seagram, the owner of Universal Studios and Polygram Records, for $34bn (£22bn).

The move marks the transformation of Vivendi into a global new media player to rival America Online, which is merging with Time Warner.

The deal has been driven by the need for companies like Vivendi to acquire content, for example music albums and films, which it can sell over the internet.

The purpose is "to make the internet swing", according to Vivendi chief executive Jean-Marie Messier.

Vivendi has become the latest to realise that pipes and wires are nothing without attractive content to funnel through them.

The deal, which also includes television company Canal Plus, part-owned by Vivendi, will create a company worth about $100bn (£66bn).

Mr. Messier, who will become head of the merged company, said: "This is the first company to combine premier global and local content with next generation digital distribution.

"Together we will have an enormous subscriber base across all of the most popular and fast-growing communications networks and technologies."

Edgar Bronfman, the head of Seagram, said that the combination was "an extraordinary combination of assets" that would produce "extraordinary shareholder growth".

Mr Bronfman will head the music unit of the new group.

Vodka and films

Until five years ago, Seagram was best known for its Absolut Vodka and Chivas Regal drinks brands, part of a drinks business which is now to be sold off.

When Edgar Bronfman Junior started to run the company, he quickly expanded it to include movies and music.

The stars in its Universal Music unit include Luciano Pavarotti, Icelandic singer Björk and reggae superstar Bob Marley. Its catalogue of films includes such high-profile successes as Gladiator and Jurassic Park.

What it lacks, analysts say, is distribution, something which Vivendi can provide it with in Europe, if not the US.

Vivendi, the dynamic spawn of a French water company, is now moving into the mobile internet, and wants content to ensure its dominance.

It has a deal with mobile phone giant Vodafone to create a third generation content channel Vizzavi.

What will the merger look like?

Vivendi will own 59% of the new group while Seagram shareholders will take 29% and Canal Plus will take 12%.

The merged company will be called Vivendi Universal and have a stock market value of about $100bn, with revenues of $55bn.

The new consortium will be organised into four groups: pay-TV and movie production, music, publishing and telecommunications.

Vivendi has said it will sell Seagram's drinks business, which is expected to raise about $7bn, cancelling out the company's debts.

So far, Seagram shareholders have been more enthusiastic about the merger than Vivendi shareholders.

Investors are worried that the French conglomerate could be over reaching itself. It is also bidding for third generation licences in Europe.

Shares in Vivendi have fallen more than 20% since 13 June, the day before the two companies said they were in talks.

On Tuesday they dropped by 8.6% to 88.10 euros at the close after the deal was announced.

Shares in Canal Plus dropped by 12% to 178.6 euros, on fears that the regulators would demand changes in its structure once it owns a film studio.

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See also:

11 Jan 00 | Business
Can the internet save 'old media'?
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10 Jan 00 | Business
AOL and Time Warner to merge
14 Jun 00 | Business
Vivendi and Seagram tie up
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