With E18 billion in debt, Vivendi will have to divest some of its assets. The water business would be a good source of funds – but the French government will insist on a French buyer, and there are few likely candidates. Vivendi may instead be forced to sell its US-based media businesses, returning the company to how it looked six years ago.
Vivendi has a two-week deadline to obtain new financing, after ousting CEO Jean-Marie Messier.
Despite replacing outspoken chairman Jean-Marie Messier, French conglomerate Vivendi is still hardly out of the water. With E19 billion in debt, the company may soon need to break up its portfolio of media and water companies to meet repayments. The board has a two-week deadline to obtain new credit from its banks, after which decisions on asset sales will be made.
With reliable revenues and profits, Vivendi Environnement could be the best part of the group to divest to make the debt more manageable. Vivendi Environnement owns stakes in UK water companies South Staffordshire and Bristol Water, with the stake in the former worth GBP120 million.
However, Vivendi Universal has already cut its stake in the group almost to the point of losing control, and the French government has stipulated that the buyer must be French. The government is also keen that the TV business, Canal Plus, remains in French hands – particularly since (by law) it is partly responsible for funding French cinema
Given the restrictions imposed upon Vivendi, it is possible that the company may have to make a u-turn and sell back the US media businesses that it bought from Seagram just two years ago. This would leave the business looking more like the utility group that it was in 1996 when Mr Messier took over.
While such a decision would hurt national pride, it would at least satisfy the French government that key assets would remain in French hands. It would also increase the chances of French banks providing capital.
You can download a FREE utilities report from www.dmfreereports.com