Vivendi Sheds Part of Stake in Utility Division

French media conglomerate Vivendi Universal said Sunday that it has completed the sale of a 20.4% stake in utility arm Vivendi Environnement to a group of French, Italian and U.S. investors for $1.85 billion.

Vivendi Universal, whose businesses range from Hollywood films to wastewater treatment, also said it has agreed to sell the rest of its 40.8% stake to the investor group by late 2004.

The agreement means Vivendi Universal, which began as the water company Compagnie Generale des Eaux in 1853, will become a pure media business, completing its transformation away from its roots.

“It’s in keeping with the strategy announced ... on Sept. 21 that Vivendi plans to focus on its entertainment businesses,” company spokesman Alain Delrieu said.

On Nov. 7, the debt-ridden conglomerate announced plans to begin pulling out of the utility business as part of an effort to strengthen its finances.

Vivendi Universal Chairman Jean-Rene Fourtou has sought to improve the company’s balance sheet after a spending spree during the tenure of his predecessor, Jean-Marie Messier, left the company with huge debts.

Vivendi Universal said the sale of the 20.4% stake and call options for the other half was based on a price of $22.42 for each share and call option.

When the transaction closes Dec. 24, the investors are to receive shares plus call options that can be exercised until Dec. 23, 2004.

Vivendi Universal said the sale puts the company on track to cut its debt to about $13.9 billion by the end of the year.

The company said the sale “represents a new important milestone in the financial restructuring of Vivendi Universal and allows it to improve significantly its financial flexibility.”

The investors are mainly French companies, such as insurers AGF and Groupe Axa, banks BNP Paribas and Credit Agricole Indosuez, and utility Electricite de France. Others include the Italian insurer Assicurazioni Generali and the Wasserstein Family Trust of the United States.

Vivendi Environnement supplies water to 110 million people in more than 100 countries, including 26 million households in France. The company recycles the trash of 74 million people in 48 countries, cleans up the streets of 4,000 cities, including London and Madrid, and runs 236 train and bus services in 20 countries.