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The free fall in the share price began last fall as investors, burned by Enron, became increasingly wary of Vivendi's complex accounting and unfocused strategy. In the spring, Messier survived an attempt to oust him led by the Bronfmans, whose 5.5% stake had withered under Messier from $3 billion in value to less than $1 billion (see accompanying story). By last week, Messier had lost the support of key French allies and was voted out.
Vivendi's pieces may now be worth more than the whole company. If all its businesses were sold individually, the sum of the parts could fetch upwards of $55 billion, according to Michael Nathanson, an analyst at Sanford C. Bernstein, compared with a recent whole-company market value of $17.4 billion. Vivendi's 44% stake in Cegetel, France's second largest phone company, is worth an estimated $5 billion to $7 billion. Analysts say Vivendi is considering selling Canal+, France's much beloved, money-losing pay-TV operation, for at least $5 billion. Universal's movie studio, theme parks and music business (the world's largest) could bring about $17 billion, and USA Networks' cable channels and TV studio might fetch an additional $7.4 billion.
The problem is that many potential buyers are in no shape to pursue Vivendi's assets. Germany's largest TV broadcaster, Kirch Group, is kaput, bankrupt; Rupert Murdoch's News Corp. is negotiating with Vivendi about buying its troubled Italian pay-TV operation for $1 billion, and analysts say it has little appetite for more Vivendi assets; AOL and Disney, with sagging share prices, aren't in a position to use their equity for currency. Investor sentiment, moreover, has shifted away from the big merger. "Media companies are going to have to retrench," says analyst Peter Mirsky of SG Cowen. "Investors want to see clean stories, clean balance sheets, clean cash flows and a focus on the basics."
The most talked-about scenario--though far from certain--has Diller somehow taking over Vivendi's U.S. entertainment assets. Diller, 60, is a central-casting media mogul beloved on Wall Street for creating shareholder value. Also, he took Messier and Edgar Bronfman Jr. to the cleaners last year when he sold USA Networks to Vivendi for $10.3 billion; he had bought the assets from Seagram for less than half that amount in 1998. As part of the deal, he was personally guaranteed at least $275 million to oversee Vivendi's film and TV assets, consolidated in an entity called Vivendi Universal Entertainment. By most accounts, Diller has not imposed major changes, and he has repeatedly said he has no interest in taking over the whole company. The firm's French directors would probably prevent it, on nationalistic grounds.