Orange in Exclusive Talks to Sell 80% Stake of Dailymotion to Vivendi -- Update

By Ruth Bender 

PARIS-- Orange SA on Tuesday agreed to enter into exclusive talks to sell a majority stake in video-streaming site Dailymotion to Vivendi SA, a deal that looks set to end the telecommunications operator's protracted and politically sensitive hunt for a partner to develop the site.

In a joint statement, the companies said Vivendi has offered to buy 80% in Dailymotion for EUR217 million ($235 million). Orange will keep the remaining 20% stake if the companies reach a deal at the end of the exclusive talks, the groups said.

The deal with Vivendi would assure that French companies retain control of Dailymotion after the French government twice prevented Orange from selling a stake in the site to a foreign company.

Orange has been looking for a partner for Dailymotion for more than two years, arguing that it needs a co-investor with global reach to expand the site.

Dailymotion was founded in 2005, around the same time as Google Inc.'s YouTube. The streaming site has gained global scale and attracted funding, making it a symbol for a successful French start up. But Dailymotion has remained far smaller than YouTube in terms of audience and revenue.

Vivendi is pledging to boost Dailymotion by offering viewers more exclusive content it will be able to pull from its music and TV businesses. Vivendi owns French pay-TV group Canal Plus--which has a wide audience in Africa and some Asian markets--as well as global music corporation Universal Music Group.

"The idea is not to have a Dailymotion that is the no. 2 to YouTube but to make out of Dailymotion the no. 1 in its own niche," Vivendi Chief Executive Arnaud de Puyfontaine said on a conference call.

For Vivendi, the Dailymotion deal marks the first major move under the leadership of Chairman Vincent Bolloré, as Vivendi stands at a strategic crossroads. The former conglomerate in recent years has sold off many assets such as telecommunications and videogames businesses, slimming down to a much more media-centric version of itself.

Mr. Bolloré, since taking over as chairman last year, has said little about his plans for Vivendi and the group in recent weeks has come under fire from a U.S. hedge fund for not returning enough money from asset sales to shareholders and providing too little information about its strategy.

"This is a first step in our ambition to create a large, global group that is focused on media and content," Mr. Bolloré said in a statement. Still, the Dailymotion deal is small compared with Vivendi's scale. Vivendi's bid values Dailymotion at EUR265 million, including debt. Asset sales have left Vivendi with net cash of nearly EUR5 billion at the end of 2015.

For Orange, the deal marks the end of a tumultuous search for a partner. Many bidders have come and gone since the French government in 2013 scuttled a deal for Orange to sell a majority stake in the site to U.S. Internet heavyweight Yahoo Inc. Orange also changed its stance several times as to whether it wanted to keep control of the site or not.

Last month, Orange came close to completing a deal with Hong Kong-based telecom company PCCW Ltd., but the company pulled out of talks Monday after France's economy minister urged Orange to look for European partners, opening the door for Vivendi to come forward with an offer.

"Our partnership with Vivendi will enable Dailymotion...to accelerate its growth internationally and to enhance its content offer," Orange Chief Executive Stéphane Richard said in a statement.

Vivendi has had an interest in Dailymotion for years. Last year, Canal Plus tried to negotiate a deal but, at the time, Orange wanted to hold on to control and the deal failed, Vivendi executives said. The fact that Vivendi's new bid offers to use not only video content but also music content from Universal helped convince Orange this time around, said Stéphane Roussel, a member of Vivendi's management board. Around a third of videos watched on sites such as Dailymotion are music-related, he said.

Write to Ruth Bender at [e-mail]

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