When Jean-Marie Messier, the deal-hungry chief of media giant Vivendi Universal, snapped up Seagram and its vast array of entertainment assets last year, the cynics came out in force.
How would Messier, a former French banker and civil servant with no experience in the cut-throat and idiosyncratic world of Hollywood, succeed where outsiders had always failed before?
And how would the Franco-American conglomerate, with no distribution outlets in the United States to speak of, match the profit potential of rivals like AOL Time Warner Inc., Walt Disney Co. and Viacom Inc.
In recent days, Messier has made an ambitious attempt to silence those critics and secure the credibility that has eluded him, particularly with investors across the Atlantic.
Last Friday, he announced he would shell out $1.5 billion for a 10 percent stake in U.S. satellite television firm EchoStar Communications Corp.
On Monday, he followed that up with an agreement to acquire the entertainment assets of USA Networks for over $10 billion – a complex deal that snares crucial television content and distribution, as well as the services of consummate Hollywood insider Barry Diller.
“Anglo-Saxon investors have not bought into Messier’s strategy in the past,” said Jacques-Antoine Bretteil, fund manager at International Capital Gestion. “These two deals have the potential to draw in reticent investors and reinvigorate the group.”
Vivendi’s potential has most certainly been enhanced and that was reflected in a five percent rise in the company’s stock on Monday.
With the EchoStar deal, the media giant receives five satellite channels with nationwide reach in the United States. The USA Networks deal, meanwhile, gives it access to the USA and Sci-Fi cable networks on top of content like the hugely popular “Law & Order” television series.
RISKS RISE
But along with that potential come risks. Following a flurry of U.S. deals earlier in the year, including thepurchase of textbook publishing powerhouse Houghton Mifflin and music website MP3.com, investors will now be keenly focused on how Messier integrates his array of alluring assets.
“These deals look like steps in the right direction but the focus is now on integration,” said Rohini Rathour, global fund manager at Sarasin Asset Management in London.
“Messier has proven himself to be a very capable dealmaker but people don’t want Vivendi to be a holding company for nice assets. We want to see synergies and assets being put to work.”
Question marks also surround the future of the relationship between the headstrong Diller, who will be appointed chairman of a specially created new company called Vivendi Universal Entertainment, and the spotlight-seeking Messier.
With his proven track record at Paramount Pictures and Rupert Murdoch’s Fox network, Diller is expected to lure the U.S. investors that Messier never quite won over – since announcing the Seagram deal, Vivendi stock has slumped over 40 percent.
But signs that all may not go smoothly between Vivendi and Diller were already evident on Monday as spokespeople from the French group and USA Networks clashed over the true value of the deal.
Ultimately, analysts say, the success of Vivendi’s latest foray into the United States hinges on whether the company can rapidly begin distributing its ample entertainment assets over its newfound outlets and do so in a cost-effective fashion.
The recent success AOL Time Warner has had in marketing its blockbuster film “Harry Potter and the Sorcerer’s Stone” over its many distribution channels has demonstrated the soundness of the business model.
The question analysts pose is how soon the French group can match the firepower of its larger competitor. In order to move swiftly the company must ensure that integration issues and potential management conflicts do not get in the way of Messier’s ambitious vision.
