VIVENDI UNIVERSAL TO READY ENTERTAINMENT FOR SPINOFF

Vivendi Universal Chairman Jean-Rene Fourtou told analysts today that he will begin a process of cutting costs and "strengthening” the company’s U.S. entertainment assets in preparation for an IPO or outright sale of the assets, according to a Reuters report out of London. VU may also partner with other companies in spinning off the assets.

In a conference call, Fourtou said improving the entertainment assets’ profitability would be key in carrying out his plan. “We think there are a lot of cost cutting possibilities, particularly in Los Angeles, and we are working on plan of reducing costs in those assets,” he said.

Of the direction he will take with VU’s entertainment holdings—which include Universal Studios, Universal Music Group, cable channels Sci Fi and USA Networks and theme park and video game divisions, all under the control of Fourtou and VU Entertainment chief Barry Diller—Fourtou said, “From a strategic point of view, I have adopted the suggestion of Barry Diller to try to create a very strong company in entertainment under the Universal brand, which means keeping most of the assets and offering others to come with us to strengthen the whole and probably to go partially on the market.”

According to the Reuters report, one possible partner is John Malone’s Liberty Media, which could combine some of its holdings with VU’s assets, which would then be partially floated as a separate company.

Fourtou will also continue to entertain outside offers for the assets, such as oil tycoon Marvin Davis’ recent $15 billion bid, which VU initially rejected. “It is a question of value and price,” he said.

News of VU’s entertainment plans comes hot on the heels of its $3.99 billion purchase of British Telecom's 26% stake in French phone company Cegetel, which in the first nine months of this year generated more profit than all of Vivendi's U.S. entertainment assets combined.