In bringing an explosive end to his career as CEO of the Franco-American media giant Vivendi, Jean-Marie Messier managed a rare feat in the world of global business. He combined Gallic intransigence with Yankee arrogance to infuriate shareholders and employees on both sides of the Atlantic. The French hated him for selling out their culture, acting like a foreign mogul and moving to New York City. North Americans hated him for losing money and refusing to concede that his strategy had faltered. Even as the company's stock price descended to new lows, he spoke of running Vivendi "for another 15 years." It was more like another 15 minutes.
Messier was forced to resign when French board members joined the biggest North American shareholders--the Bronfman family, led by Vivendi vice chairman Edgar Bronfman Jr.--in concluding that French business honor (not to mention Bronfman billions) could be redeemed only by bringing on a new boss. Jean-Rene Fourtou, a well-respected pharmaceuticals-industry veteran, is now in charge.
In Vivendi, Messier created a complex media waterworks from what was once a simple French water utility, acquiring a hodgepodge of cross-border assets, from phone companies to film studios, that at some point were supposed to connect seamlessly and gush money. But he was late to the Big Media theory. Firms like Disney, AOL Time Warner, News Corp. and Viacom had already spent billions connecting content with distribution. To catch up, Messier became a serial acquirer, buying the Bronfmans' Seagram Co. and its Universal movie studio, theme parks and music group for $34 billion in stock. Last year, in the U.S. alone, he agreed to buy book publisher Houghton Mifflin, music website mp3.com a 10% stake in the EchoStar satellite service, and the entertainment assets of Barry Diller's USA Networks for a total of $14.4 billion.
It may now be Vivendi's turn to lead, in what some predict will be a cycle of disaggregation among media companies--if not much of corporate America. Shares in media concerns have been eviscerated by an advertising recession, high debt loads and, in AOL Time Warner's case (down 55% this year), slowing Internet subscriber growth. AOL Time Warner shares have also been hit by investor aversion to companies with complex accounting stories, in the wake of bookkeeping scandals at WorldCom, Qwest and Adelphia Communications.
Fourtou, backed by French Establishment businessmen such as the AXA insurance firm's Claude Bebear, said Vivendi's future will be sorted out over the next three months. The stock rallied in response, but the company is $18 billion in debt, has no clear strategy and may need $5.8 billion to cover debts and contingent liabilities this year. Though Vivendi reported revenues of $56 billion last year, it also recorded the largest corporate loss in French history--about $12 billion--caused mainly by writing down the value of assets. Vivendi's stock fell 85% from its peak before Messier was booted. Fourtou "is going to have to turn Vivendi into a smaller and, above all, clearer company," says Marc Touati, chief economist for Natexis-Banques Populaires in Paris. "That will involve straightening out the books so investors can see exactly where things stand." It might also mean setting Vivendi's U.S. assets loose, possibly into the hands of Diller, who has already profited mightily in dealmaking with Messier and Bronfman.