Parent Of World's Biggest Record Company To Merge With French Firm

Deal would combine label homes to Eminem, *NSync and Pavarotti with telecommunications, broadcast holdings.

The compression of media conglomerates took another step forward with reports that Seagram Company Ltd. — owner of the world's biggest record company, Universal Music Group — would announce on Tuesday

morning that it is merging with French utilities company Vivendi.

The deal would combine the content-rich Seagram — whose entertainment assets include rapper Eminem, opera singer Luciano Pavarotti, pop group *NSync, the film "Gladiator" and the TV series "Law & Order" — with the telecommunications and broadcast capabilities of Canal Plus, another French company, as well as Vivendi's own telecommunications and broadcast assets.

It "brings the content to the content providers," said one industry insider who asked not to be named.

The new company is expected to be renamed Vivendi Universal.

At a planned news conference Tuesday in Paris, Vivendi and Canal Plus are expected to announce an all-stock bid for Seagram reportedly worth $33 billion.

The merger comes on the heels of the impending America Online-Time Warner merger, announced last year, and further unites the worlds of old and new media.

"This merger/acquisition was very inspired by the AOL-Time Warner deal," Mark Mooradian, an industry analyst for Jupiter Communications, said. "It's no coincidence that you now have two broadband communications-directed companies making music their focus."

Vivendi has a stake in AOL France and controls France's #2 telecom operator, Cegetel, the French film company Pathe and a piece of media mogul Rupert Murdoch's BSkyB satellite network.

"I think you will start to see digital initiatives moving more quickly than in the last few years," Mooradian said. "[Vivendi] is definitely paying for [Seagram's] Universal Music Group and PolyGram acquisition."

The Seagram-owned Universal Studios Group is a media conglomerate that includes film and television studios, theme parks pay-per-view channels, concert venues, record labels and television, home video and music publishing businesses.

Universal Music Group, created when Seagram combined its record company, Universal, with rival PolyGram in 1998, is home to such labels as Interscope, Geffen, Decca, Deutsche Grammaphone, Def Jam, MCA Nashville, Island, Motown and Verve.

Acts on those labels range from classical artists Pavarotti and Andrea Bocelli, to rock stars U2, Beck and Elton John, pop stars Christina Aguilera and *NSync, country stars Vince Gill and Lyle Lovett, jazz artists Roy Hargrove and George Benson, and rappers Eminem and Dr. Dre.

Recent and upcoming film releases from Universal Pictures include "Nutty Professor II: The Klumps," "U-571" and "Gladiator." Television programs include "Xena: Warrior Princess," "Law & Order" and talk shows from Jerry Springer, Sally Jessy Raphael and Maury Povich.

For nearly 70 years, Seagram was most known for its beverage brands, including Glenlivit and Chivas Regal scotch whiskies, Absolut Vodka, Mumm Cordon Rouge champagne and Martell cognac, as well as Seagram's 7. It also owns several wine brands, such as Almaden, and Godiva chocolates. It is expected that Seagram will unload its beverage holdings in the deal.

When Edgar Bronfman Jr. took over the company about five years ago, he began turning it into a media company that culminated with the creation of the Universal Group.

Recently, Vivendi, which began as a water utility company, signed a deal with Vodafone to create a new European Internet portal, Vizzavi.

Vivendi holds a 49 percent stake in Canal Plus, which has a pay-TV business in more than 13 countries, a film studio, plus satellite and interactive TV interests, all which are expected to be absorbed by the new entity.

"The Vivendi board was enthusiastic," Vivendi Chairman Jean-Marie Messier was quoted as saying by Reuters on Monday. "Enthusiastic means we approved it unanimously, likewise for Canal Plus."

The combined venture would create a company with revenues of $65 billion and a market capitalization of $100 billion, according to a BBC news report.