The Turnaround of Vivendi Universal

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Case Details:

Case Code : BSTR199
Case Length : 15 Pages
Pages Period : 1998-2005
Organization : Vivendi Universal
Pub Date : 2006
Teaching Note :Not Available
Countries : France
Industry : Media and Telecommunications

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Enter Fourtou

Immediately after the exit of Messier, Fourtou took over as VU's CEO on July 3, 2002. Fourtou had been credited with turning around the pharmaceutical company Rhône-Poulenc (RP) and transforming it into the very successful Aventis by merging RP with the German pharmaceutical company Hoechst in 1998.

At VU, Fourtou's immediate concern was to find a way of repaying the short-term and medium-term loans of VU and helping the company regain its financial health. In August 2002, VU reported a loss of € 12.3 billion for the first half of 2001-02. The company also revealed that its debt amounted to € 19 billion. In addition, the company's credit rating by rating agencies had dropped to junk status. After these reports, the company's share price dropped by a further 45 percent to € 9. Fourtou promised the shareholders that he would steer the company out of debt and regain its financial health. He wrote an open letter to the shareholders assuring them that he had "identified a strategy for getting out of this crisis..."

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2003: A Year of Transition

In the shareholders' meeting in April 2003, Fourtou announced that VU had raised funds amounting to € 15.2 billion through various measures such as disposal of assets in 2002 and 2003, issuance of convertible bonds in 2002, issuance of high-yield bonds in 2003 and bank loans.

However, the company still carried a debt of € 12.337 billion as of December 2002. Revealing his plans for the year 2003, Fourtou said, "2003 will be a year of transition and, with some uncertainties, concerning the successful implementation of our plans and priorities which are now, thankfully, clear." In 2003 the main focus was yet again on reducing the debt burden of the company.

However, this time Fourtou was more concerned about which assets to sell and which to retain. The telecommunications business was clearly given priority over other businesses. The purchase transaction of Cegetel was formally completed in January 2003...

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