Vivendi Shares Surge as New Management Takes Charge

PARIS -- Vivendi Universal’s battered stock began a nervous recovery Thursday after a team of French business veterans took charge of the media group, vowing to avert a cash crisis and keep the ailing giant in one piece.

The new management team set to work on a rescue mission to tackle the huge debt left behind by ousted empire builder Jean-Marie Messier, sending Vivendi’s shares as much as 17% higher after a grueling sell-off this week.

In a sign the French establishment had moved in to save the teetering group, Vivendi unveiled a hit squad of French business heavyweights led by new Chairman and Chief Executive Jean-Rene Fourtou to take the reins of the world’s second biggest media group.

Vivendi appointed Axa insurance boss Claude Bebear, one of France’s most influential businessmen and the driving force behind Messier’s ejection, to the board and put him in charge of a new finance committee, making him the power behind Vivendi’s throne.

“Bebear has the credibility to restore market confidence,” bankers at CSFB said in a research note.

Fourtou and Bebear’s first task will be securing short-term funds after the group’s debt ratings were cut to high-risk “junk” level. Vivendi said it already was in talks with its main credit banks to secure new credit “as soon as feasible” and the group set a two-week deadline to resolve its cash problems.

Concerns that Vivendi is struggling with its $18.5-billion debt after its credit ratings were slashed, wiped a third off the market value of the group in just three days this week.

The shares have lost 75% so far this year amid mounting fears of a cash crisis or accounting and debt problems. But they closed up 5.5% on Thursday after Fourtou said he was confident Vivendi could make ends meet.

“The new team was essentially hired to sort out Vivendi’s short-term liquidity and it’s likely to succeed in that. That’s all the market wants right now, it’s not worrying about strategy too much,” said one London-based analyst.

Messier had been blamed for many of Vivendi’s woes after transforming a water utility into a media titan, which is home to prized assets including Hollywood’s Universal Studios and the French pay-TV station Canal Plus.

Fending off talk that Vivendi may break up its scattered portfolio of Hollywood movies, rap artists, water supplies and sewage farms to pay back debt, the government and sources close to the new board warned against dismantling the Messier empire.

Culture Minister Jean-Jacques Aillagon said he wrote to Fourtou to spell out his “vigilance, concern and worry” over the future of Vivendi, which he called an “essential part of the French cultural heritage.”

French politicians are keen to keep at least Vivendi’s water and TV business in French hands. Canal Plus is partly responsible for funding France’s cinema industry, a hot political issue in a country proud of its cultural independence.

“No breakup is envisaged at this stage. There’s no need for it from a strategic angle,” said a source close to the board.

The Vivendi crisis has triggered speculation it could be forced to sell back the U.S. media assets it brought from the Canadian Bronfman family two years ago.

That would leave Vivendi looking barely different from the diversified water company Messier began running in 1996, when its stock price was almost twice what it is now.

“We know that [media] content is essential for the various networks we have. It would be wrong to sell Universal Music or Universal Studios at a cheap price,” another source close to Vivendi board members told Reuters.

As part of the clean-up operation, the new management issued a two-page statement late Wednesday setting out Vivendi Universal’s funding needs for the next four weeks in a bid to soothe fears about an imminent liquidity crisis.

Nevertheless, Fourtou is expected to preside over the sale of at least one of Vivendi’s core businesses to make debt more manageable. The most likely to go would be the rest of its stake in water unit Vivendi Environnement and Canal Plus--as long as they remain French, analysts said.