Vivendi Universal: In a Strategic Flux

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Mending the Mistakes Contd...

In August 2002, VU wrote down the value of some of its assets including Canal Plus, Universal Studios, Universal Music and its telecom operations by £ 7 billion. The company reportedly admitted that it had overpaid for acquisitions made during the dot com boom under Messier's leadership. After this announcement, S&P and Moody's further slashed VU's ratings. At this time VU's share was trading at € 9.20 (80% lower than at the beginning of 2002). In August 2002, in a letter to the company's employees and shareholders, Fourtou said that he would raise £ 6.2 billion over the next two years by selling off the non-core assets, including the non-French operations of Canal Plus and the Internet-based businesses. He said, "I want to reassure you: the company's situation is certainly tense, but I have identified the way out of this crisis and the way to be back on track." He further added, "VU is carrying too much debt. No matter what, lowering the debt burden will require significant asset disposals." Fourtou began the asset disposal exercise by selling Houghton Mifflin for £ 1.4 billion. VU also sold a 50% stake in Vizzavi to Vodafone for £ 90 million (valued at £ 2.5 billion during the dotcom boom).

Vizzavi, which was once dubbed the 'first portal of the second internet age' by Messier (who had invested £ 500 million in it since its launch in 2000) had not made any profits. However, VU retained control of Vizzavi France so that it could make use of its media assets through SFR by providing Vizzavi's online services through mobile phones. In October 2002, VU sold its European and Latin American publishing businesses¹³ to Natexis-Banque Populaire, a French bank, for € 1.25 billion (£ 800 million). Natexis-Banque Populaire in turn was to sell these businesses to Lagardère, a leading publishing group in France.

During the same month, French prosecutors launched an investigation to find out whether VU had misled investors by providing falsified accounts during Messier's tenure. These investigations by the French Bourse regulator (the 'commission des operations de Bourse') and French justice officials were carried out in response to a complaint filed by shareholders in July 2002. Commenting on the issue, an investor said, "We have been wronged by Vivendi's former management, its board and its auditors and we now trust that the investigation will get to the bottom of the matter."

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13] These businesses included two prestigious French brands: Larousse and Univers Poche.