CEO fears breakup of conglomerate
By Sylvie Dale, Online Editor
PARIS, July 2, 2002 -- Jean-Marie Messier agreed to leave Vivendi Universal Tuesday, expressing fears of what would become of the empire he had a strong hand in building.
A downgrade to junk status from the ratings agency Moody's has caused Vivendi Universal stock to plummet nearly 34%. The debt ratings of Vivendi's subsidiary, Vivendi Environnement (VE), remain at A3 but Moody's is reviewing them for a possible downgrade also.
Shortly after Messier announced he would resign, the French newspaper Le Monde put out a report that Vivendi may have exaggerated its 2001 financial records by roughly 1.47 billion dollars.
The Paris stock exchange had to stop trading on Vivendi Universal shares four times Tuesday as the value dropped by as much as 34 percent, the Associated Press reported.
In its downgrade of Vivendi Universal, Moody's cited concerns over the company's ability to service its debt, its recent acquisitions and its failure to complete sales of some of its assets.
During the past weeks, Moody's has been reviewing the financial flexibility of VE including the impact of Vivendi Universal's deteriorating credit profile.
Moody's viewed it as a positive move that the parent company reduced its ownership of VE from 63% to 48%.
But VE's debt has increased more than previously expected in 2001 due to a series of smaller acquisitions and the award of a higher number of contracts that require a greater amount of CAPEX. The agency estimates that VE's CAPEX will continue to increase during 2002 and 2003, but notes that the company is committed to keeping it to a maximum of around EUR 3 billion (excluding possible CAPEX from Southern Water) from 2004 onwards.
Messier acknowledged that the board of directors was divided in its support of his plans for the company and said he wanted the company to stay in the hands of the French.
If Vivendi Universal's board elects Jean-Rene Fourtou to replace Messier as expected, Fourtou may be in favor of breaking up the company into more manageable parts, AP reported.
Vivendi Environnement, headquartered in Paris, France, is the holding company of one of the world's largest integrated environmental and outsourcing services groups. The Vivendi Environnement group had revenues of € 29.1 billion in 2001.
Messier took over the former French water utility Compagnie Generale des Eaux in 1996, and renamed it Vivendi in 1998.
