Vivendi raises stakes in BSkyB and Canal Plus

VIVENDI, THE French conglomerate, dramatically reinforced its claim to be the dominant force in European pay-TV yesterday by splashing out pounds 1.6bn in cash and shares to raise its shareholding in BSkyB and France's Canal Plus.

The French company will pay Pearson pounds 408m for its 4 per cent indirect stake and pay Granada pounds 417m for a similar sized interest. That amounted to a 9 per cent premium, or 600p per share, against BSkyB's closing price of 555.5p, up 5p.

Vivendi already owned a 17 per cent interest through its recent takeover of Pathe, which is due for completion in September, pending certain regulatory clearance. The Pearson and Granada stakes, held through a holding company with Pathe, have been up for sale for sometime.

As well, the European pay-TV giant, whose interests span utilities and water processing, spent a further pounds 800m to buy a 15 per cent Canal Plus stake owned by Richemont, the Swiss-based luxury goods provider. It boosts Vivendi's holding in Canal Plus to 49 per cent, though the company said that level will later fall to about 40 per once an international strategic partner is found that can add value to Canal Plus.

That could open the door for Rupert Murdoch to get a toehold in continental pay-TV. Already number one in France, Canal Plus also operates the Italian market leader Telepiu and various other pay-TV operations, notably in Spain and the Netherlands.

"I would like to take advantage of the 9 per cent opening in Canal Plus's capital to reinforce Canal Plus's international strategy and presence with a partner which does not have a strong presence in Europe and would like to grow with us in new communications businesses," Pierre Lescure, chairman of Canal Plus.

Yesterday's move amplifies remarks made earlier this month by Jean-Marier Messier, chief executive of Vivendi, that the company doesn't intend to be a "passive minority shareholder" in BSkyB. Concern about the determined French corporate predator's long-term designs on BSkyB saw Mr Murdoch, whose News Corp owns a 40 per cent interest, become chairman in June.

Acquiring the Pathe stake will entitle Vivendi to nominate two members to BSkyB's board. "Vivendi is tightening its grip on Canal Plus and, by increasing its stake in BSkyB, it positions itself as having the upper hand in a possible merger between Vivendi and BSkyB," said Andrea Azzimondi, head of media research at Paribas. "(Vivendi) is not stopping there, it could go to 30, 40 per cent, and the market is wondering what Murdoch is going to do."

Sources close to BSkyB said it was business as usual. "Sky's agenda is digital in the UK, not international mergers," said one.