Vivendi Universal, the world's No. 2 media company by market value, said Bertelsmann Chief Executive Thomas Middelhoff resigned from its board of directors.
Middelhoff cited conflicts of interest between the two entertainment companies as the reason for his departure.
"It was an uncomfortable situation, as they're competitors in music and publishing," said Eric Burkel, an analyst with Global Equities, who has a "buy" rating on Vivendi Universal shares.
Paris-based Vivendi Universal is the owner of Universal Music Group. Bertelsmann wants to combine its music unit, whose artists include Carlos Santana, with EMI Group to create the world's biggest music company. Vivendi Universal will sell its 50% stake in France Loisirs, a book club, to Bertelsmann, it said. The price was not disclosed.
It's also considering buying Bertelsmann's stake in online music service GetMusic. "They're just reshuffling assets at this point," Burkel said. "At this stage it's too early to give these businesses much importance."
Vivendi Universal Chief Executive Jean-Marie Messier transformed the 148-year-old utility into a media company with last year's $30-billion purchase of Seagram Co. Although he's betting that online sales of music and films will spur faster growth than sales of water, consumer reluctance to pay for entertainment online may make it difficult, investors have said.
The two companies are considering combining their television sports rights businesses. Options being considered range from a merger to a non-equity-based cooperation, a Canal Plus spokeswoman said last week. The venture could negotiate rights for use by Canal Plus and other TV companies.
"Now that Middelhoff is gone, they can find areas of possible cooperation," Burkel said.
Vivendi Universal's American depositary receipts fell $3.36 to close at $60.05 on the New York Stock Exchange.