Vivendi Execs in Talks on Deals for Universal

Vivendi Universal’s top executives have begun exploratory talks with several companies interested in Vivendi’s American entertainment assets, according to sources familiar with the matter.

The prospective deals could involve either a buyout of Vivendi’s movie, television and theme park properties or the creation of a new entertainment company to be run by Barry Diller, the current chairman of Vivendi Universal Entertainment.

Among those who have expressed interest are cable industry magnate John Malone, who already owns 3.5% of Vivendi. DreamWorks SKG, the 8-year-old entertainment company financed by Microsoft co-founder Paul Allen and owned and run by filmmaker Steven Spielberg, veteran studio executive Jeffrey Katzenberg and music industry icon David Geffen, also talked with Diller.

While other sources at Universal Studios dismissed the idea of a DreamWorks-Universal deal, the studios have a long-standing relationship, with Universal distributing the smaller company’s films and housing some of its executives in offices on its lot. Before DreamWorks’ formation, Spielberg produced some of his biggest box office hits, including “Jaws,” “E.T.” and “Jurassic Park,” for Universal.

Neither Malone nor DreamWorks executives returned calls.

The sale of Universal Studios, estimated to worth at least $20 billion, would go a long way toward solving Vivendi’s crippling debt problem. That is, if buyers are willing to pay something close to what the assets are worth.

With shares of leading media companies AOL Time Warner Inc. and Walt Disney Co. selling at record lows and Wall Street struggling under the cloud of corporate malfeasance, it couldn’t be a worse time to try to sell anything.

Vivendi Universal’s shares rocketed more than 20% on Monday as investors reacted to word that the conglomerate could secure $2 billion in financing and had entered talks to sell its stake in a money-losing Internet venture.

Analysts said the prospect of the loan package and the possible sale of the half-stake in the Vizzavi wireless Internet portal helped rally the shares, which plunged 45% last week after Chief Executive Jean-Rene Fourtou warned of a liquidity crunch. Selling its stake in Vizzavi, however, would do almost nothing to alleviate Vivendi’s $19-billion media-related debt burden--the stake is considered worthless. But it would mark another symbolic nail in the coffin of former CEO Jean-Marie Messier, who was ousted over the costly bid to become a media titan.

Messier had touted Vizzavi as a distribution system that would play a pivotal role in Vivendi’s move to build synergy. He said the Internet portal would be a means of selling Universal’s music and films to mobile-phone customers. But more than two years after launching, the service remains riddled with technical problems and offers little content.

Vivendi executives confirmed they are in talks to sell their stake to Vodafone Group, Vivendi’s partner in the 50-50 joint venture. Vodafone probably would absorb Vizzavi equipment and services and eliminate the Vizzavi brand. Vivendi’s bid to jettison the stake follows a failed revival of the Internet portal. In January, Vizzavi’s owners undertook a management shake-up and laid off about 100 employees. But the restructuring failed to staunch the losses.

The move also comes as Fourtou is accelerating an auction of Vivendi’s assets. He has put U.S. publisher Houghton Mifflin on the block, as well as a stake in satellite-television provider EchoStar Communications Corp. and part of French pay-television firm Canal Plus. Fourtou has declared he plans to raise $9.8 billion from asset sales during the next two years.

According to Vivendi sources, the company also plans to sell the rest of its European publishing units. However, Fourtou told the company via e-mail this week that he would do no such thing.

Vivendi’s exit from its touted wireless distribution venture, executives say, also underscores the message Fourtou has conveyed to them.

Although early asset-sale plans have not included entertainment assets, Fourtou has made it clear that Vivendi has little intention of remaining a major player in the entertainment business.

Indeed, an open letter sent by Fourtou to employees and shareholders did not fully reassure analysts that the conglomerate could fend off other financial woes or establish a strategic direction.

Vivendi’s “various activities have nothing to do with one another,” Fourtou said in Sunday’s letter. “Some will have to be sold to find the financial flexibility needed for the others.”

Vivendi Universal closed up $2.17 to $11.93 on the New York Stock Exchange.

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Times staff writer Corie Brown also contributed to this report.