Vivendi, Seagram, Canal Plus form $ 34 bn media giant

Under the terms of the share swap, Seagram shareholders will receive 0.7 Vivendi shares for each Seagram share held, while Canal Plus holders will get two Vivendi shares for each share held.

The merger joins Seagram’s entertainment assets, which include Universal Pictures and large music holdings, with the growing telecommunications and Internet infrastructure being developed by Vivendi.

"This is the first company to combine premier global and local content with next generation digital distribution," said Vivendi Chairman Jean-Marie Messier, who will take over as chairman and Chief executive of the combined group. "Together we will have an enormous subscriber base across all of the most popular and fast-growing communications networks and technologies."

The deal marks a milestone in Vivendi’s quest to transform itself from a bulky utilities conglomerate into a leading-edge global media player. Vivendi will take another step in that direction on Monday when the company launches its Internet portal Vizzavi with British partner Vodafone AirTouch Plc.

First announced in January, Vizzavi will offer Internet access and online services to the group’s combined 80 million mobile phone users and pay TV subscribers in Europe.

Messier, who has masterminded Vivendi’s transformation, is eager to distribute Seagram’s extensive entertainment content via the portal. Vivendi also controls France’s number two telecoms operator Cegetel, publisher Havas, film group Pathe and a stake in Web provider AOL France.

To be called Vivendi Universal, the combined entity will have revenues of some $55 billion, market capitalisation of $100 billion. It will be a force to be reckoned with for rivals like AOL-Time Warner, the US media giant which is still in the process of being formed.

The transaction calls for Vivendi to assume some $ 7 billion in Seagram debt. But Vivendi signalled on Tuesday that this would be erased following the sale of Seagram’s beverage business, which includes well-known brands like Chivas Regal whiskey and Absolut vodka and could fetch around $6-7 billion.

Seagram head Edgar Bronfman, who concentrated on building Seagram into an entertainment company, was named vice chairman of the combined company and will head the group’s music and Internet businesses.

Seagram will have five of 20 board seats, with Vivendi holding 14 and Canal Plus Chairman Pierre Lescure the remaining seat. While Seagram shareholders have broadly welcomed the deal, European investors have said the merger is not without risks for Vivendi. Worries centre around the dilutive impact of a deal on Vivendi earnings and losses in some of Seagram’s activities.

While Seagram shares rose after the companies confirmed the discussions last week, Vivendi shares have slumped over 26 percent since the deal was announced.