Vivendi Universal S.A. chairman Jean-Marie Messier reportedly told analysts in France last week that his company is in preliminary discussions with Liberty Media Group Inc. to gain control of Liberty's 20-percent stake in USA Networks Inc.
According to a report issued by Credit Lyonnais Securities in Paris, Messier said he was talking with Liberty about swapping part of its 23-percent stake in direct-to-home satellite service British Sky Broadcasting plc for Liberty's USA shares.
No deal was called imminent. Were one to materialize, Vivendi would end up with 63 percent of USA Networks' outstanding class A common stock.
But USA Networks would still be controlled by chairman Barry Diller, who controls about 74 percent of votes through his own holdings and also has voting rights for the USA shares that Liberty and Vivendi own.
Vivendi acquired a 43-percent stake in USA Networks through last year's acquisition of The Seagram Co. Ltd. But to gain European Union approval of that acquisition, Vivendi agreed to unload its BSkyB stake within two years.
Credit Lyonnais Securities USA analyst Richard Read-who follows USA but did not write the Vivendi report-said Messier has stated in the past that he'd like to increase his stake in USA.
"They [Vivendi] clearly want to unload BSkyB, because there are limited buyers for that position, simply because nobody wants to commit $6 [billion] or $7 billion for something they would have no role in the management of," Read said.
Ultimately, Diller must approve any deal.
According to the proxy statement issued in January 1998, when USA first reached its agreement with Seagram/Universal, Diller has the right of first refusal for any deal between Liberty or Universal that involves USA stock.
While that agreement allows Universal to increase its stake in USA to 57.5 percent, it cannot acquire more than 1.5 percent of USA's outstanding stock in any 12-month period.
USA Network and Vivendi representatives would not comment. But Read believes Diller will sign off on the deal, mainly because he will still control decision-making at USA and has enjoyed a good relationship with Vivendi so far.
"They [Vivendi] would give Diller free rein," Read said. "The way I view USA is, they are probably the vehicle that would head Vivendi's U.S. thrust."
USA has had some battles in the past with Seagram-primarily because Seagram had the right to block any capital expenditure by USA that exceeded 10 percent of its market capitalization, currently at about $17 billion. And though Vivendi retained that right when it bought Seagram in October, the French conglomerate has given no indication that it would limit Diller's spending.
"They [Vivendi] are a good big shareholder because they're very aggressive and they would probably pony up any capital calls necessary in any kind of big acquisition by USA," Read said. "I think there are a lot worse people to have for shareholders than those guys."
The deal also would benefit Liberty by giving it a larger share of BSkyB, which is currently controlled by News Corp.
News has said it plans to roll BSkyB-the second-largest pay television provider in Europe-into its planned Sky Global subsidiary. Earlier, News had announced plans to spin Sky Global off as a separate stock later this year.
