Vivendi unloads BSkyB shares to help finance expansion in America

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Vivendi Universal yesterday moved to raise more cash from its BSkyB stake and bolster its balance sheet ahead of a possible US acquisition.

The French media giant raised 4.4bn euros (£2.7bn) earlier this year by "parking" its 22 per cent Sky stake with Deutsche Bank ­ however it retained exposure to the Sky share price. Deutsche Bank loaned Vivendi the money in return for the holding.

At the time of that transaction, Sky shares were worth 630p, but they have since climbed steeply.

Yesterday's deal saw Deutsche and Goldman Sachs place equity certificates in 150 million of Vivendi's 450 million Sky shares with investors.

The deal raised about £1bn by selling the Sky shares at about 700p. However, Vivendi will only pocket the increase in the Sky share price since the original Deutsche deal, so it will walk away with about £100m. The rest will be used to repay part of the loan to Deutsche Bank. News of the discounted placing saw Sky shares tumble 7 per cent to 746p yesterday.

A banker at Deutsche said: "This is the first time ever that an equity certificate has been issued."

The share certificates, which carry no voting rights, will be listed in Luxembourg and a London listing is also planned. The security will be converted into ordinary Sky shares in October next year, with normal voting rights. "This deal allows Vivendi to reduce its exposure to Sky, it unlocks value and provides Vivendi with a better capital structure," the banker said.

Vivendi's large exposure to Sky ­ run by the chief executive, Tony Ball ­ was not considered helpful on top of its existing heavy debt load.

The French group said: "Vivendi Universal will [now] be in a position to cover any needs that may arise from various opportunities for strategic partnerships in the US television and distribution segments."

Vivendi, the world's second-biggest media group, has confirmed that it is in talks to buy the television assets of USA Networks.

Separately, Sky is trying to find a solution to its 22 per cent stake in the pay television arm of Kirch Gruppe, the private German media empire.

Rupert Murdoch's Sky has a put option that would force Kirch to buy back the holding for more than 2bn euros in late 2002. However, Kirch is already struggling with a debt mountain of at least 7.7bn euros.

Sky has said there is "uncertainty" as to whether Kirch can meet this commitment. This has led to speculation that it will either write off the investment or use debt as a means to force a takeover of Kirch, which dominates Germany's television market.

Both Sky and Mr Murdoch's News Corporation have denied any intention to make a hostile bid for Kirch, which was founded by 75-year-old Leo Kirch in the 1960s. Analysts believe it also is unlikely that Sky would simply walk away.

A News Corporation source said: "The most-hoped for outcome is that we get our money back next year. But there are other ways to get what we want. Sky can work with Kirch to strengthen the business."

Also eyeing Kirch is one of Mr Murdoch's biggest rival media magnates, John Malone, the chairman of Liberty Media. Mr Malone is in the process of buying Deutsche Telekom's cable assets in Germany for 5.5bn euros.

A meeting between Mr Kirch and Mr Malone on 15 November in Berlin has sparked speculation that he too wants to get hold of the troubled company ­ to provide content for his German cable network. He is certainly known to be interested in the Sky stake. However, Hartmut Schultz, a spokesman for Kirch denied Mr Malone had proposed a takeover of the company. He also denied that Kirch had entered into talks with Sky over the put option.