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 Ruth.Bender@wsj.com
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