Vivendi Has Deal to Sell French Publishing Unit

Vivendi Universal moved closer to unloading some of its publishing businesses as part of efforts to ease its cash crunch. But the company’s next strategic move could end up swelling its already heavy debt load.

Vivendi Universal is expected to announce today that it has reached a preliminary deal to sell its European publishing businesses, which include French dictionary publishers Larousse and Le Robert, to French media and aerospace conglomerate Lagardere.

The Lagardere purchase price was not known.

Vivendi is still mulling over offers for its U.S. publisher Houghton Mifflin Co., the Boston-based publisher of the American Heritage Dictionary and the “Curious George” series, according to sources familiar with the matter.

Analysts have speculated that Vivendi is eager to sell its publishing business and reduce its stake in the company’s core water utility to help raise cash to gain control of French telecom company Cegetel.

Investors, however, aren’t warm to the idea of Vivendi taking on more debt. The company’s shares on the New York Stock Exchange fell nearly 10% on Tuesday to close at $13.17, down $1.39.

“If you’re swapping publishing assets for telecom assets, it definitely elevates the risk profile of the whole company,” said Paul Kim, an analyst with Kaufman Bros.

Vivendi declined to comment.

Vivendi is vying with Britain’s Vodafone for control of Cegetel, the profitable French telecom company. Vodafone, which owns 15% of Cegetel, has offered to pay $12.6 billion for Vivendi’s 44% stake in Cegetel along with stakes held by two other shareholders -- BT Group and SBC Communications Inc. Vivendi has until Nov. 10 to make a counteroffer to BT and SBC.

But Vivendi, which is carefully weighing its options, is reluctant to give up Cegetel, which owns the popular French mobile phone operator SFR, because it wants access to Cegetel’s steady cash flow.

“By making this bid now, Vodafone has put maximum pressure on Vivendi Universal at its most difficult time and that is now,” a source close to the board said.

The sale of Vivendi’s publishing units has been a thorny issue for Chief Executive Jean-Rene Fourtou, who has faced demands from French politicians that the French publishing businesses stay out of foreign hands. Lagardere publishes Elle and Car & Driver magazines, and makes cars for Renault.

Joined by New York private equity firm Ripplewood Holdings, Lagardere is among three groups that bid for Vivendi’s entire publishing business (other bidders include BNP Paribas and Carlyle Group).

Vivendi recently extended its deadline for bids because the first round came in well below the $3.5 billion it hoped for, sources said.

In selling off Vivendi’s publishing business, Fourtou is undoing a key plank of predecessor Jean-Marie Messier’s strategy. It’s part of a plan to raise $12 billion in asset sales over the next 18 months and lower the company’s $19-billion media debt. Vivendi already has sold its French consumer publishing business and its money-losing Internet portal Vizzavi.

Times staff writer Corie Brown contributed to this report.