Vivendi in share sell-off to slash debt

MEDIA conglomerate Vivendi Universal has moved to cut its massive debts by slashing its stake in Vivendi Environnement, a subsidiary that provides water, waste and rail services for millions of Britons.

Chief executive Jean-Marie Messier unveiled plans to sell shares equal to 15% of Environnement's capital, raising e1.6bn (£1.02bn). The sale will be accompanied by a e1.5bn cash call by Environnement, which is quoted on Euronext Paris with a capitalisation of e11.3bn.

The moves will shrink Universal's interest in the subsidiary from 63% to little more than 40%, allowing the media group to reduce Environnement's e14bn debt and cut its own e17bn borrowings. Environnement boss Henri de Proglio will win more freedom to develop his utility business and focus on improving the services it provides to local authorities and travellers worldwide.

In Britain, Environnement's Onyx waste subsidiary is a contractor to local authorities, removing rubbish from several London boroughs and the Houses of Parliament. It also owns rail operator Connex, Three Valleys Water, Southern Water and Folkestone & Dover Water.

French politicians have protested about the possibility of France's biggest water and waste group being the subject of a foreign takeover bid. Another obstacle to the share sale was a long-standing agreement relating to its Spanish construction associate FCC.

Esther Koplowitz, chairman of FCC and owner of a 51% stake, had an option to buy Environnement's minority holding in FCC at a discount that would have netted her a e234m profit and cut Environnement's earnings by 9% last year. But Koplowitz agreed to waive her option in exchange for an agreement under which Environnement will pump more effort into building FCC.

After six months of criticism over Vivendi Universal's mounting debts and over-hasty expansion, including the purchase of Universal film studios, Messier is keen to get the cash in fast. He could use the proceeds to buy more shares in Cegetel, the phone operator that controls France's second-largest mobile network, SFR. BT, which owns 26%, might be a seller, as might US investor SBC. Building its 44% Cegetel stake to more than 50% would enable Vivendi to consolidate its profits - Cegetel made a net e693m last year - and its e1.5bn-ayear cashflow.