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Vivendi near $12.4 bn deal for USA Networks

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CIOL Bureau
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Doug Young

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LOS ANGELES: French media conglomerate Vivendi Universal has agreed to buy

the entertainment assets of USA Networks Inc. for about $12.4 billion in cash,

stock and assumed tax liability, a source familiar with the deal said on Sunday.

One source said Vivendi's board approved the deal on Friday, the same day the

company said it will buy an 11 per cent share of EchoStar Communications Corp.,

the No. 2 US provider of satellite television.

Meanwhile, USA Network approved the deal late on Sunday, according to another

source who spoke on condition of anonymity. The companies plan to make an

announcement in the near future, probably on Monday, the sources said. Under the

transaction, Vivendi Universal would pay about $9 billion for the stake it does

not already own in USA Networks' entertainment assets, which include cable

channels, the USA Network and a television production unit.

Vivendi Universal would also pay $1.65 billion in cash, and $750 million for

USA's stake in a new joint venture between the two companies. Lastly, the French

company would assume a $1 billion tax liability to USA Networks, the source

said.

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A spokeswoman for USA Networks and a spokesman for Vivendi, which already

owns 44 per cent of USA Networks, had no comment on the situation. Under the

transaction being discussed, Barry Diller, USA's chief executive officer, would

head a new Vivendi-controlled company that would combine USA's cable networks,

television production unit and film company with Vivendi's Universal Studios

theme parks and movie studio, according to a report in the Los Angeles Times.

The Universal film studio has produced such blockbusters as the

"Jurassic Park" movies and "The Mummy", while USA's

properties include the Sci-Fi Channel and the "Law & Order"

television franchise.

Analysts said the deal would be an important acquisition for Vivendi, the

world's second largest media company, by giving it a US distribution outlet for

its vast catalog of films, television programs and music. Vivendi was seeking

such a platform to allow it to compete in the United States with other major

media companies like The Walt Disney Co. and AOL Time Warner Inc.

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In a move to raise cash for the deal, Vivendi last week said it was selling

an 8 per cent stake in Rupert Murdoch's UK pay television firm BSkyB for $1.5

billion. Earlier this month, Vivendi also raised more than 1.2 billion euros by

selling shares in utility firm Vivendi Environment.

Vivendi CEO Jean-Marie Messier is clearly in deal-making mode. He is also in

advanced negotiations to buy Murdoch's Italian pay-TV operator Stream after an

original plan to merge their Italian operators fell foul of regulators. Talks

with US cable king John Malone over some form of European alliance or asset swap

have also been rumbling on, sources say. Malone's Liberty Media owns 21 per cent

of USA Networks.

Messier has previously discussed the possibility of swapping his 22 per cent

BSkyB stake for Liberty's USA Networks stake. After the sale of part of his

BSkyB stake to institutional investors, Messier will hold a 14 per cent stake in

BSkyB.

(Merissa Marr in London contributed to this story)

© Reuters Limited.

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