Orange Set to Enter Talks With PCCW to Sell Dailymotion Stake -- Update

By Ruth Bender and Sam Schechner 

PARIS-- Orange SA is set to enter exclusive talks with Hong Kong-based PCCW Ltd. to sell a stake of about 49% in Dailymotion, according to people familiar with the matter, after years of trying to sell a stake in the video-streaming site.

Orange has informed its board that it plans in the coming days to sign an agreement on exclusive negotiations with PCCW over a deal to bring in a large foreign investor to help expand Dailymotion globally, the people said.

PCCW, the telecom company controlled by Richard Li, the son of Hong Kong tycoon Li Ka-shing, made an offer valuing Dailymotion at about EUR250 million ($264.5 million) including debt, one of the people said. The exclusive talks are expected to run for about 45 days, the person said.

A PCCW spokesman declined to comment. An Orange spokesman said the company is still talking to several different partners and hasn't entered exclusive talks with any of them.

If the talks conclude, Orange would find itself with a heavyweight shareholder on its side to help it broaden Dailymotion's reach, after a plan to sell a large chunk of the video streaming site to Yahoo Inc. was scuttled in 2013 by the French government.

Besides being Hong Kong's dominant telecommunications operator, PCCW also owns media activities, including Hong Kong pay TV service now TV, digital music streaming site MOOV and a pay-for video streaming website called Now.com.

"Dailymotion is already popular in Asia and so this is a natural expansion for them," said one of the people familiar with the matter.

The prospect of a deal follows years of uncertainty over the future of the French video-streaming site, which is widely seen as an example of a successful French start-up.

Dailymotion was founded in 2005--around the same time as Google Inc.'s YouTube. Similar to some other French startups, such as music service Deezer and online-advertising company Criteo, the video-streaming site has gained global scale and attracted funding.

But Dailymotion has remained far smaller than YouTube in terms of audience and revenue, and Orange has hunted for a partner to help expand the site for at least two years.

In early 2013, Orange came close selling a majority stake in to Yahoo but the deal fell apart after then-industry minister Arnaud Montebourg stepped in to oppose a takeover, later saying the U.S. tech firm might have "devoured" a French jewel. The French state owns a 27% stake in Orange.

In the meantime, the French government has shifted its stance, signaling that it is more open for Orange to sell Dailymotion to a foreigner. France's deputy minister for digital affairs, Axelle Lemaire, has said that she was open to finding new investors and that a new "Dailymotion affair" must be avoided by all means.

Orange has since held talks with a variety of potentially interested partners but changed its stance several times over whether to sell only a minority stake or control of Dailymotion.

After insisting for a year that it was seeking partners to sell a minority stake, Orange's Chief Executive Stéphane Richard said last November the group was also open to selling control. He then said the company still hadn't decided on the future business model for Dailymotion, a choice that would essentially determine who to pick as partner.

Mr. Richard said one option was to develop the site as a free service and expand in other markets. Another could be to turn it into a paid-for platform, which would call for tying up with a company that has content, he said.

Write to Ruth Bender at [e-mail] and Sam Schechner at [e-mail]

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