Messier May Yet Cut Water Utility Stake

Vivendi Universal Chief Executive Jean-Marie Messier faces a pivotal meeting this week with board members in New York, where he will be under pressure to map out a clearer vision for the struggling French entertainment giant and a detailed plan to reduce its debt.

Messier is expected to reverse previous assertions and present a plan Wednesday to reduce Vivendi Universal’s stake in Vivendi Environnement, its water and sewage services utility, to less than 50% from 63%.

Such a move could help Messier shore up some confidence among investors, who’ve pushed the company’s stock price down nearly 50% this year amid concerns about the company’s strategy and high debt load. Those concerns prompted Moody’s Investors Service to lower the company’s debt rating to one level above “junk” status this month.

Pressure on Messier has been mounting, and last week Claude Bebear, an influential French executive who chairs insurance group Axa, openly criticized Vivendi Universal’s management in a radio interview in France. “There is certainly a problem of strategy and decision making in this company,” he said.

Vivendi declined to comment on the statement, noting that Bebear does not sit on the company’s board. The board publicly declared its support for Messier at the company’s tumultuous annual shareholders meeting last month.

Investors, however, continue to express their impatience with his leadership and the company’s languishing stock price.

“He’s running out of friends and running out of time to turn around the company,” said George Nichols, an analyst with Morningstar Inc. in Chicago.

In its effort to transform from a water utility to a “pure play” media company, Vivendi has amassed more than $26 billion in debt through a series of high-profile acquisitions, including that of Seagram Co.’s Universal Studios and the television and movie business of USA Networks.

Reducing its stake in the utility business would allow Vivendi to raise about $1.6 billion in cash and remove $13 billion from its balance sheet.

Messier has made conflicting statements on the company’s plans for Vivendi Environnement, a 149-year-old utility that is separately traded and is among the world’s largest water companies. Its holdings include U.S. Filter of Palm Desert.

Although Messier has said his strategy is to build a global media company, about half of Vivendi’s income and revenue still come from the water business, creating confusion among analysts and investors over what the company stands for.

Responding to that concern, Messier told analysts earlier this year that he intended to lower the company’s stake in the utility to below 50% while increasing the company’s stake in Cegetel, the profitable French telecommunications business.

But at the company’s shareholders meeting in April, Messier emphatically told shareholders that such plans were “not on the agenda.”

Messier, badly wounded in a battle with the French establishment over a controversial overhaul at the pay-TV unit Canal Plus, changed his tune after French President Jacques Chirac and unions warned him not to sell to foreign interests.

Vivendi reportedly may get around the political problem by selling part of its stake to French banks.

Vivendi’s shares rose 5% last week amid hopes that the company would divest itself of part of its utility stake. Vivendi Universal closed down 80 cents at $30.50 Friday on the New York Stock Exchange.

At Wednesday’s meeting, the board is not expected to reconvene shareholders for another annual meeting, according to sources close to the board. After its annual gathering in April, Vivendi discovered that the electronic voting system had been tampered with and asked authorities to investigate. The company also won court approval to schedule another meeting but has since reconsidered because of the costs involved and reluctance to give Messier’s critics another platform, sources said.