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In another disastrous week for Vivendi Universal, the ailing media group suffered at the hands of a confused investor base as it attempted to sell a Eu1.5bn stake in its utilities subsidiary, Vivendi Environnement, on Monday.
The market had been expecting the deal for some time. The French media group has been toiling under a huge debt burden, which has weighed down its stock price. And it had made clear that it needed to reduce its position in Vivendi Environnement to below 50% to avoid having its water subsidiary's debt consolidated on its own balance sheet.
But when Reuters announced on Friday last week that Vivendi Universal had entered into a repurchase agreement with Deutsche Bank which involved the media group placing shares in Vivendi Environnement with the bank in return for Eu1.5bn of funding, the market misinterpreted the deal. Jean-Marie Messier, Vivendi Universal's chairman, said this week that the market had misunderstood the transaction to mean that the media group was suffering from short term liquidity problems.
In fact the deal with Deutsche Bank was only struck to obtain cheaper financing by avoiding capital gains tax on the sale. Details of the repurchase agreement were only supposed to be announced after the sale of stock in Vivendi Environnement was completed. The inopportune...