Competing Agendas at Vivendi

Vivendi Universal’s top American executives are flying to Paris for their first face-to-face meetings Monday with the ailing corporation’s new chairman, who will help determine the future of some of Hollywood’s premiere entertainment companies.

Although the trip is being billed as a series of formal presentations and informal gatherings to bring Chairman Jean-Rene Fourtou up to speed on Universal’s studio, theme park and music company, the various individuals sitting around the table have dramatically different agendas. The Americans want to be freed from the corporation’s financial quagmire, and the French want to keep the company afloat.

The Monday meetings are part of Fourtou’s broad effort to shape a new strategy for Vivendi, which has amassed billions of dollars in debt, leading to a plunging stock price and the ouster of its previous chief executive, Jean-Marie Messier. The company’s confusing identity--half European water and sewer utility and half international media conglomerate--has bewildered investors here and abroad.

“This company is a collection of disparate assets that you cannot say belong together in a cohesive strategy,” one person close to the board said.

Although U.S. executives are not expected to advocate a specific course of action, some privately have said they favor a scenario in which Universal’s entertainment properties would be severed from Vivendi control and spun off as a separate company.

But the most powerful of those executives, Vivendi Universal Entertainment Chairman Barry Diller, has yet to tip his hand. Diller oversees the company’s movie, television and theme park operations. Said one colleague: “Barry’s being coy.”

Preparing to meet with his new boss, Diller has held a series of meetings over the last two weeks during which he has pressed his executives to think about the future and give him their wish lists, concrete proposals to champion with the French, according to sources at the companies.

Accompanying Diller in Paris will be the president of Universal Studios, Ron Meyer, and the chairman of Universal’s music division, Doug Morris.

Throughout Hollywood, there has been speculation that Diller is laying the groundwork to buy Universal or, at the minimum, to head a newly autonomous company. Sources close to Diller, however, have said that the longtime entertainment executive has expressed no interest in buying or controlling Universal.

When he sold his USA Networks to Vivendi late last year for $10.4 billion, Diller agreed to become chairman of Vivendi’s non-music U.S. entertainment assets, an unpaid position with no contracted time frame. He did receive a lump sum payment of $275 million.

Separately, Diller kept control of USA Network’s e-commerce business, USA Interactive, and has been splitting his time between that venture and Universal.

USAI, considered the company with the greater growth potential because of expanding Internet commerce, has been dominating Diller’s time.

Fourtou, since replacing Messier two weeks ago, has been spending most of his time grappling with the company’s immediate financial crisis, a cash shortfall hastened by concerns over the company’s $30-billion debt. To buy time, Fourtou secured a $1-billion loan so he could address the company’s larger strategic issues.

“They do not have the luxury of time,” J.P. Morgan Securities analyst Mark Harrington said. “Without question, there’s a risk that the company’s longer-term strategy could be compromised by this overriding priority to improve its liquidity.”

With the stock price falling 70% this year, the Vivendi board of directors is unified in the need to regain shareholder confidence but is in no rush to dismantle the company, sources close to the board said.

The directors plan to take at least the next month to gain a better understanding of the various assets and weigh their options.

During that time, however, that unanimity will be tested should there be a clash between the company’s French identity and the need to rescue the stock price.

“At the end of the day, the board that chooses pride over shareholder value is making an error and taking a risk,” the source said.

J.P. Morgan estimates that, in the worst-case scenario, Vivendi needs to raise at least $8 billion from asset sales over the next 18 months. Vivendi will be forced to make a major asset sale in the next few months to meet a $1.8-billion funding gap this year. That gap will widen to $6.3 billion by next year.

Further evidence of widening shareholder disillusionment came Thursday when investment group Rosenbaum Partners filed a lawsuit on behalf of shareholders in federal court in New York, accusing the company of hiding its cash crisis. Vivendi had no comment.

Joining the U.S. executives and Fourtou at Vivendi’s headquarters next to the Arc de Triomphe will be two key players in the ouster of Messier. One is Claude Bebear, chairman of France’s largest insurance company, Axa, and Fourtou’s closest advisor. The other is Edgar Bronfman Jr., who represents the interests of the Bronfman family, the largest individual holder of Vivendi stock and the previous owner of Universal Studios.