The sell-off of French giant Vivendi’s media assets has had buy-out bankers licking their chops the world over. But what does it spell for the increasingly monolithic publishing culture in France? This month Jean Rosenthal, former President of French publisher Stock and currently a translator and consultant to the publishing business, offers a view from Vivendi’s home turf.
“He really is a very clever guy,” an investment banker commented after the announcement that Jean-Luc Lagardère had bought Vivendi Universal Publishing. It is indeed a coup you can only see every quarter-century in the book business, ending a nerve-racking spell after the departure of Jean-Marie Messier, the flamboyant President of Vivendi (and now tell-all author of My True Diary). Dodging European anti-trust regulators and putting down protests by his own compatriots, the artful Lagardère has managed to turn his company, France’s enormous aerospace-and-media concern, into the nation’s now undisputed book publishing behemoth.
How could it have come to this? When new Vivendi CEO Jean-René Fourtou arrived last July, he knew only that he had to find one thing: cash. Specifically, a liquidity infusion for a group exhausted by too many acquisitions. Selling off the company’s entertainment units — cinema and music — presented a number of touchy problems, with partners across the Atlantic deeply reluctant to cede control of Hollywood studios to non-Americans. That left one option: books. Fourtou decided at a very early stage to sell the publishing branch of the company, Vivendi Universal Publishing (VUP), a huge chunk of French letters including such prestigious houses as Laffont, Plon, Presses de la Cité, Belfond, Press Pocket, and Larousse. Before the Messier era, this galaxy of publishers bore the rather nice name of Groupe de la Cité. With a turnover of 2.5 billion euros in 2001 (1.1 for Europe, 1.4 for Houghton Mifflin), it was #1 in French publishing.
Those who have followed the buy-out blow-by-blow will know that there were three eager suitors: PAI, in partnership with Apax Partners and American funds Thomas H. Lee, Blackstone, and KKR; Eurazeo, a holding of the French Banque Lazard in partnership with American fund Carlyle; and Lagardère, who had bought Hachette more than 20 years ago when he was a leader in the arms and missile industry. When rumors of the mammoth sale began to leak, protests rang out: it was unconscionable to let le patrimoine français fall into the hands of foreign investors, and finance vultures on top of that. Lagardère rode in on his white horse, with aerospace connections to the French administration and a chummy relationship with President Chirac. Wishes from the Elysée Palace did not leave Jean-René Fourtou unmoved, and Jean-Luc Lagardère pocketed VUP.
This created an extraordinary situation. For the time being, and before any sale to other publishers to prevent a monopolistic situation, the new Hachette-VUP group represents 30% of the French trade publishing market; 80% of its paperback market; 80% of reference books, dictionaries, and school books; and 70% of the nation’s book distribution business. The behemoth has a turnover of practically 2 billion euros, a staggering ten times as much as its direct competitors: Gallimard, ranking second among French publishers, with a turnover of 235 million euros; and Flammarion, with turnover of 216 million.
Reactions were immediate. Antoine Gallimard, President of the company bearing his name, says: “It is an earthquake.” He claims to be worried not so much about freedom of expression, but about the nuts and bolts of the business: “the distribution system may well be an overwhelming burden.” Claude Cherki, CEO of Editions du Seuil, adds: “Mr. Fourtou has just taken a tremendous risk. The situation of the publishing industry in France will be unique, with the creation of an enormous group which will be a mega monster.” Groupe Albin Michel President Francis Esmenard, as usual, was more restrained in his comments, suggesting in a very British way that the nation should wait and see. (One should observe that since Lagardère will be legally bound to sell a few companies, Albin Michel would have a unique opportunity to strengthen its position in the textbook field.) On the other hand, a few voices were heard to defend Hachette’s stand. Fayard CEO Claude Durand, in a letter to Le Monde, expressed enthusiasm to see Lagardère offer a “solution, both French and realistic instead of the purely financial and essentially American propositions made by other candidates.” At the same time, Jean-Louis Lisimachio, the head of Hachette Livre, tried to reassure booksellers, who were panicked to see Hachette devour such a huge share of the French market.
Enron, N’est-ce Pas?
Jean-Marie Messier, on the other hand, has his own spin on the matter in My True Diary. It perhaps goes without saying that the title was not published by his former publisher, Hachette Littérature, but by Balland, a small independent company. The former Vivendi CEO explains that he has been the victim of a council of godfathers led by Claude Bébéar, the former President of AXA, the largest French insurance company, who loves to play the éminence grise of French capitalism. Messier admits a few mistakes, but regrets he was not given the time to show that he was right. (“Vivendi is no Enron,” he told reporters in Paris, when put on the spot about the fact that French authorities were investigating alleged corporate misdeeds under his watch.)
Whatever the reactions, the die is cast, and it is highly unlikely that any serious challengers will oppose the deal. It is true that Lagardère used a very clever stratagem to avoid problems with the European Commission in Brussels, which is always on the lookout for unfair competition. VUP was sold to Natexis, a bank which in due time will sell pieces of the prey to Hachette or to other buyers. Meanwhile, both Jean-Luc Lagardère and his son Arnaud vow that Hachette will “preserve the French cultural heritage and respect the independence” of publishers. As Lagardère ironically observes, “At the time we bought Hachette in 1980, people were shocked to see ‘un marchand d’armes’ take over a prestigious publishing house; today, they resent the fact that a big publisher could swallow a competitor like VUP. For my status, it sounds like an improvement.” As for Vivendi itself, the sale of VUP will be like uncorking an oxygen bottle. The company, which is $19 billion in debt, needs cash to reinforce Cegetel, the phone company which is a highly desirable asset in the group. The books-for-phones irony was not lost in publishing circles. “It is too bad indeed to jeopardize the status of French publishing companies,” Antoine Gallimard sadly commented, “in order to save the future of the French telephone industry.”