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While Fourtou and Diller say they are still on good terms, tensions have erupted more recently over an effort to renegotiate a partnership agreement that gives Diller the ability to make the sale of Vivendi's entertainment assets.

VIVENDI UNIVERSAL SHOWDOWN

Fourtou, Diller Square Off Over Company’s Entertainment Assets as Fourtou Takes Back Music
It looks like the relationship between Vivendi Universal CEO Jean-Rene Fourtou and Barry Diller, the mogul in charge of the company’s entertainment assets, may be coming to a head.

According to numerous published reports, the French company chief will be in New York today to meet with Diller and other top executives to address his concerns about the company’s direction and its planned sale of its entertainment assets.

Indeed, the New York Post reports that Foutou has taken Universal Music back under his direct authority, and that UMG Chairman/CEO Doug Morris now reports directly to him—as he did before Diller became his direct boss last fall.

"It was a move to assert [Fourtou's] authority," one source told the Post.

In November, Diller was given expanded authority over Vivendi's entertainment businesses. He was named Co-CEO of the division—to go along with his chairmanship—and the company added the music and games divisions to his responsibilities.

While Fourtou and Diller say they are still on good terms, tensions have erupted more recently over an effort to renegotiate a partnership agreement that gives Diller the ability to make the sale of Vivendi's entertainment assets—namely the Universal movie studios, theme parks and cable channels—prohibitively expensive, the New York Times reports. In the event of a sale, Vivendi would owe Diller a disputed amount to cover tax liabilities. Diller has put the figure at $2 billion but Fourtou says the amount is closer to $1 billion.

Moreover, a loophole in the contract might absolve Vivendi of any payments if the sale were structured in a certain way — as a single package, for instance, rather than as separate entities, the report says. That is at odds with Diller's reading of the agreement.

Another disagreement centers on $620 million that Diller says Vivendi owes his company, USA Interactive, which was created when USA Networks merged its cable, film and studios with Vivendi's entertainment businesses.

Some of the tension at the company has existed since that USA Networks deal, when some board members thought that Diller got the best of then-CEO Jean-Marie Messier.

Meanwhile, several potential suitors have approached Vivendi about buying its entertainment businesses, either in pieces or as a whole package, including oilman Marvin Davis, NBC, Metro-Goldwyn-Mayer and John Malone’s Liberty Media, according to the Wall Street Journal.

Fourtou recently met with representatives for Davis, who late last year bid about $20 billion for VU Entertainment.

But, most observers still say the most likely scenario is an initial public offering, led by Diller, sometime later this year. Under that scenario, Vivendi would keep a large stake in the businesses—perhaps as much as 40%.

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