Vivendi Universal: In a Strategic Flux

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The Beginning of the End Contd...

Criticism of Messier intensified when he sacked Pierre Lescure, the popular CEO of the loss-making Canal Plus. One of the reasons stated for Messier's sacking of Lescure was their difference of opinion over the 'Cultural Exception' issue. Messier believed that if the US style of private film financing was adopted in France, Canal Plus' losses could be controlled to a great extent. However, Lescure argued that the French film industry would collapse if broadcasters like Canal Plus did not support it. Messier in turn argued that the concept was no longer relevant in the 21st century when the world was moving towards free markets. Though Messier later claimed that his statements were being seen out of context, his remarks on cultural exception had by then done significant damage to the credibility of his ideas and beliefs. Messier's image was sullied further when he was accused of concealing the severity of the company's liquidity problems, which had been caused by the massive debt accumulated during his tenure. He had reportedly issued several press releases that stated that VU did not face any 'immediate and severe cash shortage.' This was however found to be far from the truth.

By June 2002, VU's debt amounted to $ 33 billion and the company was reportedly facing severe cash flow problems. In addition, VU's share value had dropped by 60% since the beginning of the year. In June 2002, Messier announced that the company was selling some of its stake in VE to Deutsche Bank. Later, he announced that a 15% stake of VE had been sold in the market in addition to the shares allocated to Deutsche Bank. This move created a sense of unease in the market; people began to think that VU was a cash-strapped company trying to get cash through such sell-offs. Due to all these problems the VU board asked Messier to resign from his post.

In July 2002, Messier agreed to quit after losing the support of the board in a vote of confidence. He reportedly negotiated a severance package worth € 17.8 million. Adding to the company's woes, Appac, which represented a group of (more than 1000) small shareholders, filed a lawsuit against VU (in July 2002) accusing it of issuing 'untruthful and fraudulent information' to the shareholders about the company's financial status. Appac also targeted Messier and criticized him for lack of transparency in handling financial matters.

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