Vivendi enters exclusive talks to buy Dailymotion

Vivendi has entered exclusive talks with Orange to buy 80 per cent of the French telecom operator's Dailymotion video-sharing website for €217m, the two companies said.

A deal, which would value the video website at €265m, would signal an end to Orange's lengthy search for a strategic partner to help develop Dailymotion internationally.

The transaction would also provide the first clues as to Vivendi's vision as it starts a new life as a pure content and media player.

Vivendi chairman Vincent Bollore who is under pressure to spend his group's huge cash pile, said in a statement on Tuesday that acquiring Dailymotion would "provide the group with added reach in the diffusion of high-quality musical and audiovisual content across the world".

He added: "This is a first step in our ambition to create a large, global group that is focused on media and content."

Stephane Richard, Orange's chairman and chief executive, said that bringing Vivendi in as a majority shareholder would enable Dailymotion "to accelerate its growth internationally and to enhance its content offer".

The two groups announced the all-French talks after Hong Kong-based PCCW said on Monday that it had cut off talks over Dailymotion. The PCCW decision came after the French government, which is Orange's biggest shareholder, with a 25 per cent stake, made it clear that it wanted the telecom group to seek a European partner.

The government's comments were seen at the time as evidence of French protectionism. But one person close to the transaction said: "The acquisition of Dailymotion is the opposite of protectionism; it's about extending media plurality. By having a strong content owner and media distribution group behind the platform, it will ensure more media diversity and routes to access content, not fewer choices."

For Vivendi, the bid to take control of Dailymotion offers insight in to how it intends to grow its two core businesses: recorded music, through its Universal Music Group, and television, via Canal Plus, the pay-TV business.

Over the past two years, the Paris group that started life in the 19th century as a water utility has sold off €35bn in assets. The result is a much smaller group - annual revenues have shrunk from almost €30bn to roughly €10bn last year - but also a more focused business model built around the two remaining pillars.

Dailymotion is one of the largest competitors to Google's YouTube alongside Vimeo, with more than 2.5bn video views per month and an estimated 128m unique visitors per month. Founded in 2005, it has 222 employees and had sales last year of €64m.

Vivendi could bring exclusive content to the video streaming site, potentially allowing Dailymotion to offer premium channels to users alongside existing services that are paid for through advertising.

The Dailymotion move also comes as some minority shareholders have questioned Mr Bollore's leadership at Vivendi.

P. Schoenfeld Asset Management (PSAM), a US hedge fund that holds 0.8 per cent of Vivendi's shares, has mounted a challenge to the group's dividend policy and has called for a resolution at this month's annual general meeting to force management to pay out €9bn to shareholders this year.

Mr Bollore and Vivendi management have rejected the demands, arguing that to pay out such large sums would significantly reduce its flexibility to grow its remaining businesses and to make strategic acquisitions.

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