Vivendi Universal SA faces new problems attempting to beat off Vodafone’s bid to acquire control of French telecoms operator Cegetel SA as it faces a criminal probe by US authorities, following allegations of financial irregularities during the era of former CEO, Jean-Marie Messier.
The company has approached banks to raise finance for its own bid to gain control of Cegetel but, with its credibility crumbling, it may be forced to concentrate on reducing the debt amassed during the Messier era. Although it has managed to raise a disappointing $3bn by offloading its publishing businesses, the management is under investor pressure to use the money to ease its debt rather than expand its interests.
After rejecting Vodafone’s 6.77bn euro ($6.64bn) offer for its 44% Cegetel stake, and seemingly determined to launch its own bid for BT Group Plc’s 26% Cegetel stake, Vivendi faces the prospect of its executives bring grilled in both US and French courts.
The US Attorney’s office for the Southern District of New York has confirmed it has opened a preliminary criminal investigation of the Paris, France-based company, and will co-ordinate the investigation with the Florida office of the US Securities and Exchange Commission, which has already been conducting an informal inquiry of its own. Vivendi has stated it will fully co-operate with the investigations.
The US probe follows the news last week that Vivendi is currently under investigation by the Commission des Operations de Bourse and French justice officials, looking into whether the company issued misleading statements on its financial condition during 2000 and 2001. Specifically, it will examine whether Vivendi published false accounts to hide the nature of its financial situation in 2000, and 2001, and also whether it issues misleading financial outlooks during 2001 and 2002.
Vivendi is also facing shareholder lawsuits in both the US and France. Messier’s ambitious plan to turn the French ex water company into a global media giant, amassed $18.6bn worth of debt, and during his tenure, shares dropped 91% from a record 150 euro ($149.1) high in March 2000, to just 13.9 euros ($13.8) when he was ousted in July.