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Vivendi Buying Seagram for $30B

June 20, 2000

PARIS (AP) _ As the world’s largest water company, Vivendi knows a thing or two about pipes. But it was Vivendi’s other network of pipes _ ones that carry data, voice and television signals _ that led it to pay $30 billion to acquire Seagram Co., owner of the Universal movie and music studios.

For Jean-Marie Messier, chairman of Vivendi, it was a way to make the Internet ``swing.″

The ambitious trans-Atlantic merger announced Tuesday will create Vivendi Universal, a Paris-based media conglomerate on a par with global players like AOL Time Warner and Viacom. It also completes the transformation of Seagram from distiller to media player, providing distribution channels for its films and music. Seagram’s liquor business, built up over three generations in the Bronfman family, will be sold off.

The new conglomerate will also include Canal Plus, a major European cable TV company already half-owned by Vivendi. Vivendi has been moving well beyond its core businesses of water treatment and construction in recent years, building up its media portfolio with the acquisition of the Havas publishing group and stakes in BSkyB, the satellite TV company, and AOL France.

Seagram has also been moving beyond its roots as a liquor company under the guidance of Edgar Bronfman Jr., grandson of the company’s founder. Bronfman bought Universal Studio’s parent MCA from Matsushita Electric Industrial Co. of Japan in 1995, and the Polygram music company from Phillips Electronics in 1998.

At Vivendi’s snazzy new Paris headquarters, just down from the Arc de Triomphe, the air was thick with cigar smoke on Tuesday as the new company chiefs outlined their vision for the future of wired and wireless technology.

Seated on a swivel stool and decidedly dressed down, Messier told a packed news conference the deal had occurred at ``exactly the right moment in time.″

``The Internet of tomorrow will not only be something faster and more beautiful,″ said Messier. ``The Internet of the future will have more practical services and information, it will have more entertainment and content.″

The new company will offer movies, TV programming, music, sports, games and educational and professional information via digital and analog formats.

Messier said he wanted Seagram for its world-famous Universal Studios, which will give it access to the U.S. market and give him a missing piece in his own empire _ music. Universal artists include opera great Luciano Pavarotti, reggae superstar Bob Marley, jazz queen Ella Fitzgerald and Icelandic pop star Bjork.

``For the first time in Europe, there is a communication group of a size that will be able to rival all the American giants,″ Messier said.

Edgar Bronfman, Jr., the chief executive of Seagram, said that grouping Seagram’s music assets with Vivendi’s Internet operations was the driving factor for him. He said he expects the music business worldwide to grow to a $100 billion industry within 10 years, up from $40 billion last year.

The world’s biggest record labels have been moving toward offering music for sale online, but so far the results have been limited and piracy has been spreading. Vivendi Universal is planning to push ahead with plans for a subscription service with unlimited access to a digitized music library, musical postcards and customized radio stations.

In keeping with the company’s pitching of itself as a global enterprise, Messier and Bronfman hopped the Concorde following their news conference in Paris and went to New York, where they gave a similar presentation just hours later.

There, Bronfman said the company’s first initiatives would focus on delivering information and entertainment on the Internet but also over wireless systems such as cell phones. At the center of that effort is Vizzavi, an all-purpose multi-access portal Vivendi launched this week in partnership with Vodafone Airtouch of the U.K.

``The Internet Age is no longer a PC environment,″ Bronfman said. ``It’s all-device, all the time, in all the places.″

The deal will be an all-stock transaction, exchanging Seagram’s shares for Vivendi shares. The deal originally valued Seagram at $77.35 per share, or $34 billion. But due to the slide in Vivendi’s stock, the transaction is now worth about $68 per Seagram share, or $30 billion.

Vivendi’s shares have tumbled a total of 23 percent since last week, including an 8.7 percent decline on Tuesday. Messier brushed off the investor reaction as ``speculators playing with stock.″

Seagram stock had bounced last week as news of the deal spread, but the shares gave up some of their ground on Tuesday, slipping $5.688 to $58.063 on the New York Stock Exchange.

The Bronfman family, which owned 24 percent of Seagram, will have a stake of about 7.5 percent in the merged company.

Once just a nationalized water company, Messier has transformed the firm into a global media giant, which operates in over 100 countries with 260,000 employees.


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