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Vodafone, Vivendi set for battle
LONDON, England -- Mobile phone giant Vodafone Group and media behemoth Vivendi Universal are going head-to-head in a legal battle to increase their hold on money-generating French telecom Cegetel. If Vodafone wins the court case, the UK group could soon take a majority share in Cegetel, which would enable it to expand into the only remaining European market where it does not control a mobile phone business. Paris-based Vivendi, while wants to pay down its huge mountain of debt, is not anxious to give up its stake in a cash-cow like Cegetel, even if it means sacrificing other parts of its faltering empire. The two giants will meet in a Paris court on Monday, when Vivendi will seek more time to decide its course of action. The dispute goes back to October 16, when Vodafone announced it had reached an agreement with BT Group and SBC Communications to buy their stakes in Cegetel in an all-cash deal valued at 6.3 billion euros ($6.2 billion). The deal would give Vodafone, Europe's biggest mobile phone operator, a 56-percent stake in the French telecommunications group and SFR, the mobile company 80 percent owned by Cegetel. Vodafone already owns 15 percent of Cegetel and 20 percent of SFR, France's second biggest mobile phone operator. The London-based group would pay 4 billion euros ($3.9 billion) for BT's 26-percent stake in Cegetel and $2.27 billion for the 15-percent interest held by SBC, the U.S. telecommunications group. Vodafone also made a cash offer of 6.77 billion euros to Vivendi for its 44-percent holding in Cegetel.
But Vivendi wants the Paris court to rule that it can have another 30 days -- beyond the November 10 deadline set by Vodafone -- to decide whether it will counter Vodafone's offer. "We'll abide by whatever decision the courts make,'' a Vodafone spokesman told Reuters, adding that the company was not assuming the court case meant Vivendi would not be prepared to sell its stake in Cegetel to Vodafone. But Vivendi's decision to issue a writ against Vodafone has raised concerns among investors that the world's No. 2 media group -- after CNN parent AOL Time Warner -- is determined to reject the bid. They feel Vivendi, which narrowly avoided a cash crunch earlier this year, needs to prop up its flagging finances by accepting the cash. "I would be very surprised if Vivendi would capitulate now and sell before [a court decision]," one London-based fund manager told Reuters. "They are looking at every option to buy this thing, despite the fact investors don't want them to," he said. "I'm not convinced that getting control of Cegetel doesn't make sense in the longer term -- but it will increase their debt massively." Vivendi's hunt for cash
One industry source close to the situation said there had been no contact between Vodafone and Vivendi since the bid was announced. Banking sources have told Reuters that Vivendi is discussing a variety of options, including an unusual loan that would allow it to thwart Vodafone's bid -- probably by buying the 26 percent Cegetel stake held by BT. Securing BT's stake would give Vivendi 70 percent of Cegetel and leave Vodafone with 30 percent. Some banking sources say under one scenario, the group might use part of the 1.25-billion-euro proceeds from the sale of its French, Spanish and Latin American publishing assets. Vivendi would plough some of that cash into a special purpose vehicle, which would be controlled by Vivendi and which would house Cegetel. Banks would pay for any outstanding amount needed for a Cegetel bid by offering the ring-fenced SPV a loan, which would be repaid with dividends from Cegetel.
Vivendi is in talks with banks including Credit Suisse First Boston, Credit Agricole Indosuez and Credit Lyonnais on a limited recourse acquisition financing, banking sources say. Vodafone's Chief Executive Chris Gent told a London news conference on Thursday that Vivendi would have to control any financing vehicle that it uses for raising its Cegetel stake. In a move to dash any hopes that financially-powerful Vodafone might be willing to discuss the size of its Cegetel bid, Gent insisted that his bid was final. "Those of you that speculate that we will increase the offer -- you're wrong, we're right," he said. -- Reuters contributed to this report
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