of Paris and
, its pay-TV subsidiary, negotiate to merge with
, many on Wall Street are wondering whether other suitors might emerge for the spirits and entertainment company and what a Vivendi Universal, as the new company might be called, would do with all its assets.
Though the companies did not disclose any proposed terms for a
deal, Vivendi is expected to use its stock to pay more than $70 a share, or $30.6 billion, for Seagram. Vivendi would also assume about $8 billion in Seagram's debt.
Beyond confirming that talks are continuing and that there was no certainty that a deal would be reached, the companies declined to comment. Seagram shares closed higher in Wednesday trading, up 7 1/8, or 13%, to 60 1/8. Vivendi shares fell more than 4% in Paris Wednesday.
The deal would combine Seagram, a huge content producer through its ownership of
, with an emerging distribution giant. Canal Plus is a leading European cable-TV operator and owns a film studio. And although it operates a water company, Vivendi also has extensive media interests, including a 24.5%
stake in the satellite-TV company
British Sky Broadcasting
Such combinations of content and distribution have become increasingly important in the media world since
announced they would merge earlier this year.
In a report she put out Wednesday, Sharon Williams, an analyst at
CIBC World Markets
, said that she wouldn't be surprised if
tried to muscle in on the discussions, mostly because of what she called Seagram's "clearly desirable"
Universal Music Group
, the world's largest music company.
"We believe companies like Disney and News Corp. would like to own music assets," Williams wrote. But she cautioned that a higher bid for Seagram is not likely given the uncertain impact that the Internet could have on music distribution. Neither Disney nor News Corp. offered an immediate comment on the talks.
Another possibility being bandied about is that Vivendi Universal would sell off the Universal theme parks division, which is a distant second to Disney in that category. Jill Krutick, media analyst at
Salomon Smith Barney
, said the theme park business is "not a high priority" and a fraction of Disney's size.
A person close to the negotiations, however, threw cold water on that theory. "I have not heard that," this person said, noting that the theme parks help support Universal, especially its movie studio.
For example, Universal intends to release two of its biggest blockbusters, "Jurassic Park" and its sequel, on DVD later this year and intends to spend $10 million marketing the release. Having a "Jurassic Park" ride in the Universal theme parks helps the company keep that brand fresh. A second sequel is in the works as well, another reason for Universal to maintain the "Jurassic Park" brand.
Another attractive facet to a potential union between the three companies is on the Internet. Vivendi owns a big stake in
, a Web portal with a dominant position in Europe. Vizzavi is what analysts call a "multi-access portal" in that it is aimed at access via not only the PC but also mobile phones and digital television. Vizzavi currently claims some 80 million subscribers, and Krutick of Salomon estimates that it will reach 150 million subscribers by 2002. Seagram's music holdings could play a big role in the combined company's Web presence going forward.
"Seagram's music business remains at the heart of the company and is clearly a major impetus for joining with Vivendi/Canal Plus," Krutick wrote in her report. "This Internet reach cannot be overemphasized."
One thing most analysts agree on, and that people close to the company confirm, is that Seagram's wine and spirits division will almost certainly be spun off. That unit is valued at $8 billion to $9 billion. It is too early to tell whether Vivendi Universal would sell the liquor business to the public or to another company.
Vivendi's environmental holdings, including its water interests, are also considered possible sale targets given the company's push toward media.