USA Networks unit sold to French media giant

Elaine Ganley

Monday, Dec. 17, 2001 | 10:01 a.m.

PARIS -- Vivendi Universal is buying the entertainment assets of USA Networks Inc. in a $10.3 billion deal to improve distribution of the French media giant's music and movies in the United States.

The deal announced today is the latest chapter in Vivendi's remarkable transformation in just a few years from a water utility into a global media and entertainment powerhouse.

Vivendi will combine USA Networks' assets such as the USA and Sci-Fi cable channels and the TV production operation responsible for "Law and Order" and "Jerry Springer, with its own Hollywood-based Universal Studios.

Universal has a huge film catalogue and its Universal Studios last year produced hits like "How the Grinch Stole Christmas" and "Erin Brokovich."

For $10.3 billion in cash and stock, Vivendi will get a 93 percent stake in a new company that will be called Vivendi Universal Entertainment.

USA Networks' Barry Diller, the entertainment industry veteran who ran the Paramount movie studio in the 1970s and oversaw the launch of the Fox television network in the 1980s, will be chairman and chief executive of Vivendi Universal Entertainment.

Vivendi, which acquired Universal from Canada's Seagram a year ago, hopes that Diller can expand its presence in the United States to compete with the likes of AOL Time Warner, Walt Disney Co. and Viacom.

The deal follows Vivendi's agreement Friday to invest $1.5 billion in EchoStar Communications Corp., the second biggest U.S. satellite television service with about 6 million subscribers.

In a statement, Vivendi said the two deals "fully address Vivendi Universal's needs in terms of integration and distribution on the US market."

Investors seemed to like the fit, sending Vivendi shares up 4 percent, or $1.98, to $50.93 in early trading today on the New York Stock Exchange. Shares of USA Networks rose 43 cents to $24.25 on the Nasdaq Stock Market.

Universal Studios was previously paired-up with Canal Plus Groupe, the European pay-TV group, within the Vivendi Universal organization. The new deal raises the question of Canal Plus' future status within the group.