Vivendi expected to exit ad business

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[paris] Vivendi Universal, a $34 billion merger between French conglomerate Vivendi, its pay TV unit Canal Plus and Canadian entertainment and spirits marketer Seagram Co., is developing a new global media titan but will gradually withdraw from the advertising business and Havas Advertising.

Vivendi Universal is still the biggest single shareholder in Havas Advertising, but its 20% stake will be diluted to about 10% due to Havas' acquisition of U.S. company Snyder Communications and the redemption of bonds. Vivendi's remaining stake in Havas is likely to be sold early next year.

`NOT AN ASSET'

"Long-term we are not an asset for them," said Alain de Pouzilhac, chairman-CEO of Havas Advertising. "As part of the Snyder deal, Vivendi Universal agreed to a six-month lockup. Nothing will happen [with the remaining shares] until the beginning of next year."

Mr. de Pouzilhac said that Vivendi sold an earlier 10% of its Havas stake last November, about half of which was acquired by U.S. investors.

"We've always agreed between us that any sale would be best done in cooperation with us," he said. "We'll help make it smooth."

For Havas, Vivendi's withdrawal helps the company draw in more U.S. institutional investors as the French group brings its revenue in line with worldwide ad spending. Mr. de Pouzilhac said 45% of Havas' revenue is from the U.S., which accounts for 47% of global ad expenditures.

Meanwhile, the new Vivendi Universal will marry Seagram's entertainment assets, including Universal Pictures and a variety of music holdings, with Vivendi's growing communications network, which includes pay TV, fixed and mobile phones, an Internet service provider and two promising Internet portal sites.

$55 BIL GLOBAL REVENUE

With global revenue topping $55 billion, Vivendi Universal already is being touted as the principal global rival to the entertainment giant being formed by the merger of America Online and Time Warner.

Vivendi Chairman Jean-Marie Messier -- a former French civil servant who has transformed Vivendi from a tired water utility into a global conglomerate with activities ranging from advertising to publishing and telecommunications -- will lead the new Franco-Canadian challenger. The company will be based in Paris and quoted on stock markets in New York, Paris and Toronto.

Seagram Chairman Edgar Bronfman, who was largely responsible for transforming the family-owned spirits producer into a leading entertainment industry player, will serve as vice chairman of Vivendi Universal and head its music and Internet divisions.

SPINOFF WOULD CLEAR DEBT

Seagram's spirits and drinks business, which includes leading brands such as Absolut vodka and Chivas Regal whiskey, and Vivendi's environment division comprising energy, transport, waste management and water operations, will be spun off from the new media giant, leaving it free of debt and able to pursue external growth in its new core business.

Currently the environment division, Vivendi Environnement, is running a print campaign by Havas-owned Euro RSCG Works to link Vivendi's well-known communications activities, such as mobile phones and a controlling stake in AOL France, with its environmental activities.

To help consumers make the connection, one ad is headed "100% of people who have a cell phone wash every day" and talks about the Vivendi water utility. Another ad, headed "100% of people who receive e-mail throw away trash every day," describes the company's waste management business.

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