Vivendi Universal: In a Strategic Flux

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History Repeating Itself? Contd...

Despite the alarm expressed in the media regarding the Cegetel deal, VU paid £ 2.5 billion to buy out BT's 26% stake in Cegetel in December 2002. With a total shareholding of 70% in the company, VU now controlled one of Europe's biggest telecom companies. During the same month, VU sold a 34% stake in Sithe Energies, a US power generation company, to Apollo Energy Inc17 for £ 200 million. The company also sold its 10% stake in Echostar, a satellite TV operator, for £ 670 million. VU incurred a loss of £ 270 million since it had paid £ 1 billion to buy the company in December 2001. Industry analysts at UBS Warburg, a US-based provider of financial services, were of the opinion that VU could have got a better deal than the one it had finalized. The company also initiated legal action against Appac and accused it of making false statements that "VU was about to be declared insolvent" and that "the company had filed at least seven different balance sheets."

Commenting on this, VU sources said, "VU considers it has a duty to take legal action in the interests of shareholders and employees, who should not be victims of biased information." This move came after French prosecutors raided some of the company's board members' homes as part of investigations being carried out by French justice officials. VU also announced further large-scale asset disposal moves (including an art collection containing original works by Mark Rothko and Picasso) to raise money for clearing its debt.

The company sold 89% of its stake in Canal Plus Technologies to Thomson Multimedia for € 190 million. Industry observers felt that VU was running out of options to cut its debt further. By February 10, 2003, it had brought down its debt to £ 9.1 billion from £12 billion in 2002. In February 2003, VU announced that in the year 2002 Cegetel sales had jumped 11% to £18.6 billion while fourth-quarter sales had increased by 5% over sales achieved in 2001. This helped increase the overall revenues of the company to £ 40 billion.

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17] A US based company involved in developing, producing and marketing and licensing new Energy products and Energy Systems.