- The Washington Times - Tuesday, December 18, 2001

NEW YORK (AP) Vivendi Universal is absorbing the movie and television businesses of USA Networks Inc. in a $10.3 billion deal that will give the French conglomerate a wider footprint in the U.S. market and catapult media executive Barry Diller back into a leading position in Hollywood.
Together with an accord announced last week to acquire a 10 percent stake in satellite TV provider EchoStar Communications Corp., the deal marks the latest twist in Vivendi Universal's rapid transformation from a sleepy water and utility conglomerate into a global media player.
Jean-Marie Messier, Vivendi's chief executive, told reporters yesterday at a news conference in New York that the pair of deals "address our relative weakness of integration and distribution in the U.S. The goal is to make Vivendi the global media leader of the future."
While the deal does give Vivendi more access to U.S. viewers for its movies and TV shows via the USA cable network and five new channels to be introduced next year on EchoStar's Dish network, Vivendi still lags other top media players in distribution power. AOL Time Warner Inc. owns the No. 2 cable company, and Viacom Inc., Rupert Murdoch's News Corp. and Walt Disney Co. all own broadcast networks.
Mr. Messier said in an interview that Vivendi had more work to do in getting access to viewers. "We have as a starting point for U.S. distribution this partnership with EchoStar. Obviously, this is not exclusive and we do intend to develop a whole new channel distribution" on cable TV systems, he said.
Investors applauded the deal, which streamlined a complicated corporate structure at USA Networks and landed Vivendi a seasoned Hollywood veteran to run its entertainment business.
Vivendi's shares rose $3.15 to $52.10 on the New York Stock Exchange, and USA Networks' shares rose $1.20 to $25.02 on the Nasdaq Stock Market.
Mr. Diller, who had previously run the Fox and Paramount movie studios, tried to downplay what was obviously a triumphant return to a big role in Hollywood. "I didn't think I went very far away, to be honest with you. I laugh every time I see that." But, he added, "it does make me smile."
Mr. Diller, who is known as a strong-willed and independent executive, also said he wouldn't have a problem reporting to Mr. Messier. "I'm quite happy to do so," he said. "It seems to be an issue of everyone elses' not mine."
The deals come one year after Vivendi bought the Universal music and movie studios from Seagram Co., which itself started out as a Canadian liquor company. Edgar Bronfman Jr., part of the family that ran Seagram, stepped down from his executive role at Vivendi two weeks ago, and the liquor business was being sold.
Once the deal is completed, Mr. Diller will lead a large entertainment business called Vivendi Universal Entertainment that will include the Universal movie studio, TV studios that produce "Law and Order" and several cable channels including USA and Sci-Fi. The Universal Music Group, the largest music company in the world, will remain a separate part of Vivendi.
Executives were quick to point out that Ron Meyer, the current chief of the Universal studio and the man credited with its recent comeback, will keep his position, reporting to Mr. Diller. Mr. Diller also said he didn't expect any changes in the management lineup in the television studios or cable channels.
Vivendi is paying $10.3 billion in a combination of cash and stock for the entertainment assets of USA Networks Inc., the company that Diller controlled.
The businesses include a film and television studio as well as the cable channels.
Several of these assets are going back to their original owner. Mr. Diller took control of the TV studio and the smaller movie studio in 1997 from Universal under a deal that gave Seagram, and then its corporate successor Vivendi, a 43 percent stake in USA Networks.
Vivendi will have a 93 percent stake in Vivendi Universal Entertainment, USA Networks shareholders will get 5.4 percent interest and Mr. Diller himself will own a 1.5 percent stake. Mr. Diller said he would work without an employment contract or salary.

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