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SEC Is Conducting Formal Probe Into Vivendi

Nov 20, 2002 | FT.COM

The Securities and Exchange Commission has intensified its probe into Vivendi Universal, the French water and media group.

The news sent shares down 1 per cent to EU11.06 in morning trade, although the stock was partly steadied by news that Vivendi had managed to raise the full EU1bn it had targetted in a recent bond issue, and a report in La Tribune, the French daily, that Electricité de France had agreed to take a stake in Vivendi Environnement, the water business that Vivendi Universal is seeking to sell off.

Vivendi is already the subject of separate investigations by the US attorney's office for the southern district of New York and by regulators in Paris.

Colette Neuville, president of ADAM, an association of small shareholders, said she was optimistic the SEC investigation would benefit the class action suit it brought against Vivendi in the US on behalf of French shareholders last month.

"This is likely to feed our class action suit," she said.

Mrs. Neuville said she hoped shareholders would be fully compensated for the difference in value between the price they paid for the shares earlier this year and what they would have been worth if all information about Vivendi's financial situation been widely available.

The SEC inquiry is expected to range from Vivendi's method of disclosure of its financial statements to the accounts themselves. However, the SEC has given no clear indication as to the focus of its investigation.

The Commission des Operations de Bourse, France's stock market regulator, has also launched a wide-ranging inquiry into Vivendi's accounting.

Two French judges have been appointed to investigate whether Vivendi published "false" balance sheets for 2000 and 2001. The inquiry is also examining whether it had issued "false or misleading" information on its financial prospects at that time.

The inquiries are another legacy of Jean Marie Messier, who quit as chief executive in July. Mr Messier transformed Vivendi from a French utility to media giant through $70bn in acquisitions and left the group with a staggering debt.

Analysts said the widening US probe , while potentially embarrassing for Vivendi, was unlikely to affect the current strategy of Mr Messier's successor, Jean-René Fourtou.

"It is one more thing to consider, but it is not hugely significant for what the current management of Vivendi are trying to do," said one Paris-based analyst.

Vivendi announced on Wednesday that it had raised a full EU1bn from a convertible bond offering it launched last week- a move aimed at raising its liquidity and cutting its EU19bn net debt.

The company is also seeking to raise funds by disposing of its 40.8 per cent stake in the Vivendi Environnement water arm, in a staggered sale to the end of 2004. The report that EdF would pay EU360m for a 4 per cent stake boosted Vivendi Environnement shares more than 2 per cent to EU22.89 in early trade.

Mr Fourtou has also handed greater control of Universal's media properties to Barry Diller, who oversees the group's Universal Music group in addition to its TV and film businesses.

Vivendi said it intended to co-operate fully with the SEC but declined to comment further.

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