Through Acquisition of Entertainment Assets of USA Networks, and, after Strategic Alliance with EchoStar, Vivendi Universal Strategy Is Coming Together

Business Wire, Dec 17, 2001

Business Editors

PARIS & NEW YORK--(BUSINESS WIRE)--Dec. 7, 2001

Vivendi Universal (NYSE: V; Paris Bourse: EX FP)

Deal Creates New U.S. Major Movie and TV, Production and Distribution Entity Under Leadership of Barry Diller

New Global Company to Be Called Vivendi Universal Entertainment (VUE)

- Price: Approximately $0.3 Billion in Combined Stock and Cash Transaction

- Financing:

- $7 Billion in VU's Already Owned USA Stock

- $1.65 Billion in VU Treasury Stock to Liberty Media

- $1.62 Billion in Cash (1)

- Impact on VU:

- Approximately 600 Million Euros in Additional EBITDA in 2002

(0% Accretion over Market Consensus)

- 2002 Net Income Accretive by $200 Million and Free Cash Flow

by More Than $350 Million

- VU Position: Deal Enhances VU's Position as Global

Entertainment Leader

Vivendi Universal (NYSE: V; Paris Bourse: EX FP) today announced that Vivendi Universal will acquire full control of the entertainment assets of USA Networks (USA) in a deal valued at approximately $0.3 billion. Vivendi Universal will have a 93% control of an entity to be called Vivendi Universal Entertainment (VUE) that brings together Universal Studios Group and the entertainment assets of USA. The transaction will be financed by the exchange of USA and Vivendi Universal securities and limited cash outlay by Vivendi Universal.

The agreement received unanimous support from the Vivendi Universal and USA boards.

Commenting on today's announcement, Jean-Marie Messier, Chairman and CEO of Vivendi Universal said: "Our strategy is clearly coming together. Combining within the same operational entity, VUE, USG and the entertainment assets of USA creates a new U.S. major, which will benefit from the full integration of TV and movies activities with production and distribution.

"Along with our strategic partnership with EchoStar, this transaction fully addresses Vivendi Universal's needs in terms of integration and distribution on the U.S. market.

"I am pleased to see Edgar Bronfman, Jr.'s vision come into reality with our group taking back full control of those assets after their successful growth and profitability under the efficient management of Barry Diller and his team.

"Barry has a strong track record in cash-flow growth and asset-value creation. Introducing Barry as the CEO of VUE serves our shareholders' interests.

"I know he will be able to rely in this position on the strong performance and commitment from Ron Meyer, President and Chief Operating Officer of Universal Studios Group and Stacey Snider, Chairman of Universal Pictures. They have been driving the exceptional years of success of the studios and will continue to do so.

"In addition, this strategic move will significantly benefit Vivendi Universal shareholders, because of its significant value-accretion at every level - EBITDA, net income and free cash flow. By using mainly non-core, consolidated assets to acquire this control, we are strongly positioned to enhance performance and value to Vivendi Universal shareholders.

"I also welcome Liberty Media Communication as a Vivendi Universal shareholder and a key partner as we expand our prospects in programming alliances in Europe.

"At the end of just one year following our merger with Seagram and Canal , we have put the pieces together in fulfilling our strategy. In one short year, we have focused on integration and addressing our relative distribution weakness in the U.S. - and here we are today. We expect that 2002 will be a year of growth, without further change in perimeter. At the same time, we will focus on the continuous improvement of our operational performance, increase our world leadership position in our key content units, and pursue the development of our distribution and aggregation through commercial agreements," Mr. Messier concluded.

Creating Value for VU Shareholders

The transaction results in a significant value creation for Vivendi Universal shareholders.

On top of revenues which are expected to exceed 32 billion euros in 2002, EBITDA from media activities is expected to increase by more than 600 million euros, representing more than 0% accretion over the market consensus relating to Vivendi Universal prior to September 4. The EBITDA/share accretion would represent around 8%.

Net income will be increased by approximately $200 million and free cash flow by more than $350 million.

On top of the strategic benefits, this immediate accretion at all levels of the income statement as early as 2002 will enhance value to Vivendi Universal shareholders.

Financing

Vivendi Universal will pay USA Networks approximately $0.4 billion in combined securities and cash to acquire a controlling stake of 93% in VUE. Vivendi Universal will finance the transaction by selling the 34 million shares it already owns in USA Networks, through a limited liability (LLC) company, which will account for approximately 65% of the total consideration. The value of USA Networks shares has increased by more than $3 billion since the original transaction between Seagram and USA took place in 998. In addition, Vivendi Universal will use 32 million treasury shares in exchange for part of Liberty Media Corporation's stake in USA Networks. The 32 million shares accounts for 5% of Vivendi Universal's financing of the transaction. Another 20% of the financing will be in cash: $.6 billion in cash - the same amount that the company received from USA in the original transaction - and another $750 million in various deferred payments.