Dillers Europe connection

If Vivendi gets Seagram, the French could get HSN, too

USA is poised to invade Europe if French conglomerate Vivendi succeeds in taking Seagram in a $30-plus-billion stock swap. Vivendi confirmed last week that it was in talks with Seagram, the Canadian liquor, music and moviemaker that owns about 45% of USA Networks Inc. (USAI).

Wall Street analysts agree the deal is good news for USAI from several angles. First, it would take Barry Diller, chairman of USAI, out from under the thumb of Seagram Chairman Edgar Bronfman Jr., who has veto power over USA deals exceeding $1.6 billion. The veto arrangement hog-tied Diller in his quest to buy NBC.

Vivendi, valued at $60 billion compared to Seagram's $20-billion market cap, is more aggressive and, therefore, more likely to build USA's assets, according to analysts. Sources familiar with Vivendi say the company would probably sell off its environmental division to raise enough cash for the deal, which is expected to transpire within two to three weeks.

A more immediate benefit of the deal for USA is access to Vivendi's many European pipelines. Vivendi's holdings include telephone, Internet and movie- theater companies; satellite distribution; and one of Europe's largest publishing houses. USAI provides content from the entertainment of USA Network and Sci-Fi to the video and virtual retail worlds of HSN and Ticketmaster Online.

Among other assets, Vivendi owns major chunks of Canal Plus and BskyB, the biggest pay-per-view providers in Europe and the UK; Citegel, France's second-largest telephone company; and AOL France, which is set to expand throughout Europe.

Those properties are perfect for globally expanding USA's retail businesses: Ticketmaster Online, CitySearch, Hotel Reservations Network and especially HSN, USA's best moneymaking business.

Vivendi also has a strategic partnership to develop mobile interactive services with Vodaphone, the world's largest maker of airline phones. The implication for USA's online businesses is access, anywhere, anytime.