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Exhibit 3
USA will file a proxy statement and other relevant documents concerning USA's
contribution of its Entertainment Group to a joint venture with Vivendi
Universal and certain related transactions with the Securities and Exchange
Commission ("SEC"). INVESTORS ARE URGED TO READ THE PROXY STATEMENT AND ANY
OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED IN THE FUTURE WITH THE SEC
BECAUSE THOSE DOCUMENTS CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION
RELATING TO THE PROPOSED TRANSACTIONS. Investors will be able to obtain such
documents free of charge at the SEC's website at www.sec.gov. In addition,
such documents may also be obtained free of charge by contacting USA
Networks, Inc., 152 West 57th Street, New York, New York, 10019, Attention:
Investor Relations.
INVESTORS SHOULD READ THE PROXY STATEMENT CAREFULLY WHEN AVAILABLE BEFORE
MAKING ANY VOTING OR INVESTMENT DECISION CONCERNING THE PROPOSED TRANSACTIONS.
USA and its directors and officers may be deemed to be participants in the
solicitation of proxies from USA shareholders to adopt the agreement
providing for USA's contribution of its Entertainment Group to a joint
venture with Vivendi Universal and the other related transactions described
therein. A detailed list of the names and interests of USA's directors and
executive officers is contained in the definitive proxy statement on
Schedule 14A filed by USA with the SEC on April 9, 2001. Copies of USA
filings may be obtained free of charge at the SEC's website at
www.sec.gov < http://www.sec.gov >.
VIVENDI UNIVERSAL USA NETWORK
PRESS CONFERENCE TRANSCRIPT (10:30 AM CALL)
[recording device is activated]
UM1: OK... thank you for joining us this morning...I
was, this morning, as a true New Yorker, going
through my New York Times newspaper when I read
these headlines: Messier Hits Milestone in His
Search for a Title. I found that was a little bit
strange of a title of headlines for today's
announcement. And then I was going through the
article, who says: Messier who turns 41 next
month--no, sorry, it has been 45 this
months--demonstrated Saturday night. I saw that it
was more on Sunday night that he can still play a
young man's game--not so sure--and a team game
when needed. Definitely so--the team game when
needed. And after that it was saying longevity's
probably the first thing that comes to mind; and
also being pretty lucky and fortunate to be
surrounded by good people all the way
through...yes...being surrounded by good people
all the way through. And that's the reason why I'm
so pleased this morning to be here on this stage
with Barry...but to have in the front row here my
friend Edgar, Pierre [unintelligible], Ron Meyer,
who is going to be the clear number two of this
wonderful venture...Michael Jackson. And after
reading the New York Times, I was going through
Barry's statement. And Barry's statement in his
press release...there was one expression I like
very much: `great Good Luck.' I can take it. I
have
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a great good luck...which is to be able to
transform and grow a group like Vivendi Universal;
and to be able to work with people like Barry,
Ron, Pierre, and a few others. So, that being
said, and definitely Mar Messier is a great
player...[laughter] and I am not. That being said,
let's go to the core of what we are doing
together" creating Vivendi Universal
Entertainment, VUE in English...VUE, or `VUE' with
a loud French accent. And let me start by telling
you that this has been a story in our discussions
between Barry and I for more than one year where
we have been discussing since the very beginning
of the creation of vivendi Universal...what we can
do and what we can do more together. Even if it
has been in real terms and agreements the very day
of Thanksgiving, which was a good sign. And it
was, which is also a...looking to the future, it
was a wireless handshake...you have pictures
requiring live handshake...today most of the
handshakes are wireless handshakes, and that's
where the future lies. And in that case, it was a
Thanksgiving wireless handshake. This combination
that we are presenting to you this morning is the
simplest you can imagine. It is simplest because
this is the time in the US industry of integration
and consolidation. And putting together Universal
Studios Group and USA-I Entertainment assets is an
obvious move for both of us...it's a natural fit.
So if that's obvious and natural, let's do it.
This combination, VUE Entertainment, is creating a
new US major...a tier one player. And
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that's the reason why we choose as a code name for
these discussions: Tier One because this code name
is exactly expressing what we intend to build and
to develop. And we saw that it was the right place
to compete and the right time. And thanks to these
transactions Vivendi Universal's strategy in the
US is coming together and I'm glad of it. So very
simple on the strategic basis...very simply also
on the management side and on the people side.
This business is about talents. Talents are the
keystone...the key asset of the creative
businesses. And, here, vivendi Universal
Entertainment will start with the greatest
talented team that you can imagine. I'm glad for
that to have Barry's commitment to be on board as
the chairman and CEO, both for Barry's industry
vision but also for Barry's track record in terms
of cash [unintelligible] gross, asset
value...that's my job vis a vie VUE shareholders.
By introducing Barry in this position, I'm serving
my shareholders. But this team is, and all the
leadership of Barry, not only about Barry. There
will be a clear and fantastic number two with this
team...his name, you know him, that's Ron Meyer.
And Ron has achieved since Edgar has come to join
Universal Studios, the most wonderful turnaround
and successful paths of the histories of this
industry in the States. Ron will be along Barry
the number two of this venture with...along with
him three outstanding top executives: Michael
Jackson, who will report to Ron and who will, for
the film spot,
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report to Stacy--Stacy will have under her
leadership all the movies activities. Stacy will
report to Ron; and Tom Williams on the recreation
business will do so too. A wonderful team...with
the addition of Pierre Leskur. And when I was
asked over the last few days on when I heard
questions about, `How is that going to work
between Barry and pierre?' I was saying to myself,
`look, it means that Pierre has made a good job
with Universal Studios and in the integration
between Universal Studios and Studio Canal over
the last year. Because if Pierre has not made a
good job over the last year this question would
even not arise. So, this business is about
talents. We have a wonderfully talented team
around the leadership of Barry and Ron. This
transaction is so simple on the personal basis.
Barry and I...Barry is supposed to have--I read
that also in the press this morning--a strong
personality. Wow. [laughter]. I Think that it's
going to be easy to work because our relationship
is based only on two things: the first one is
trust and respect, trust and confidence; it's
achieved by being candid, direct, and
business-focused. And a second characteristic of
our relationship is, in this case, mutual freedom.
Because of those two characteristics, this may and
this will work. On the financial side...that's a
clear win-win. USAI's getting a good price and a
full price for its assets. But vivendi Universal
on this side, without getting into details on the
financing, we are fully taking the advantage back
of the initial transaction originated by
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Edgar Broffman Jr. To have a step two you need a
step one. That's basic but that's
true...everywhere at any time. And, as you
realized, most of the price that we are paying for
USAI Entertainment assets are the shares that we
received at the time of the '97-'98 transactions;
and the cash, even on the nominal basis, we used
it nicely over that period of time that we
received at that time. Most of the transaction is
based on the initial consideration received by
Seagram. So to a large extent I want to sort of
thank and to thank my friend Edgar Broffman for
having initiated this transaction in '97. There
was a few goals in this transaction. The first
one, which was uncertain in terms of timing at
that time, was a dream of Edgar to get the full
control back of these assets one day after having
them being grown and successfully grown by the
best manager...[recording briefly stops then
starts]...We are swapping non-co, non-consolidated
assets against fully controlled--Barry, the lights
will go up when you stand up. [laughter] So, it's
a...it's very good because those non-co,
non-consolidated assets...we are turning them in
fully controlled, fully integrated, fully managed,
fully consolidated, full access to cash flow,
strategic assets. And, finally, we get so the
relationship and the enhancements of our
relationship with Liberty Media. This value and
industry-driven transaction is very positive to
Vivendi Universal. I want to welcome...so in this
room I speak about the first row but in the last
row...Doug, thank you for joining
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us because when we are speaking of leadership of
Vivendi Universal, we have to realize that's a
great part of this leadership is Doug's success in
creating, developing, strengthening, the absolute
world leader in the music side, Universal Music
Group, and I can tell you that with Doug and all
his team around him our intention, Doug, is to
kill them all. And to have UMG even as a stronger
leader on the music industry. So, ladies and
gentlemen, one year after the creation of VUE, all
the skills, all the assets, all the talents that
we need to fully deploy...our strategy, are within
Vivendi Universal or within our close partners.
This transaction allows us definitely to
successfully implement this global strategy in the
US and abroad; it does address what was seen as
our relative weakness--that is to say integration
and distribution on the US market...not forgetting
our clear advantage. Even more so, after this
transaction, we are definitely a global group well
balanced between USA--forty percent of our
turnover--and non-US world, sixty percent. This is
a great step. The ultimate goal is clearly to make
from vivendi Universal the global media leader of
the future. This is a great step towards this
goal. I am pleased to be able to announce it today
with Barry...with the support of Barry but more
than with the support of Barry, also with the
support of all the teams--especially those who
have been gathered and, at that time, Edgar's
leadership in Universal Studios
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around Ron Meyer. So, ladies and gentlemen, that's
my pleasure to introduce to you a young man named
Barry Diller.
Barry Diller: Thank you, Jean Marie. You know, I'm not so sure
that I like descriptions of age. I think, you
know, leading off with it was a bit unfair though.
Uh, contrary to written recent opinion, I am not
sixty, I am fifty-nine...but I'm not sixty...YET.
Hopefully inevitably. Um...the other thing is
that, though we use this name, which we did, which
was Jean Marie's idea called `Tier One.' From the
outset was our code name...our little code didn't
seem to work very well since this has been out
there in the world of comment and media now for a
little bit. In a way, I think it's kind of good
because, uh, it allowed people to get comfortable
with...with what is a complicated transaction
in...in its organization; but what is, in actual
reality, very simple. What we've done, and I think
that what we've been able to achieve is the
testament to the ability for it to have some
success...what we've done is to have, in a sense,
early re-patriozation of the assets of USA on the
entertainment side that...when Edgar and I did our
orginal transaction it was quite clear that the
motivation was, of course, for the assets to grow
in value and then, at a point, it was determined
then that that point would be, when I ceased to be
the chief executive, that Seagram's and Vivendi
Universal as its successor would have a `path' to
control; that path to control would have
undoubtedly been exercised and the assets would
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be put back together. What neither of us knew at
that time was that while there was some
consolidation and concentration, it had not
reached fairly fevered pace that it has in the
last several years. And what that did to
really...Jean Marie and I, when we started talking
about this, is we really said to each other and
we...we...the real, I would say, connective tissue
began right after Labor Day when we sat in a room
a couple of blocks from here and we said, `you
know, if we don't solve this issue...if we don't
solve this issue between us, while we have all got
our reasons why because it's difficult to do, it's
complex to do, it involves personalities, it
involves all sorts of...of conflicts in terms of
who owns the shares and all of that. But if we
don't solve this, years from now, people will look
and they will say, what dopes were you both that
you couldn't figure out how to get these
businesses to align themselves correctly for the
future.' And what we've done is essentially that.
Before the `termination date' of repatriating
these assets the wisdom in this transaction is
what we've been able to do; and, I think, a
perfectly balanced way is we will take the
entertainment assets of USA and put them together
with Vivendi Universal's assets so that they can
operate on a real scale integrated--which they
must be if, in fact, there's gonna be the kind of
growth and competitive thrust that's necessary in
this world. And, on the other side, the USA
Interactive assets--and later we're gonna have a
press conference on USA Interactive. We thought to
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combine everything in one thing would drive you
all crazy, much less us, but...so, immediately
after this, we're gonna turn to explaining a bit
more about what the USA Interactive company is.
But to be able to have a USA Interactive
stand-alone, independent company that has
tremendous out-of-the-gate, so to speak, starting
gun in the fact that it will have...six hundred
and some odd million dollars of cash flow in its
first year next year...uh, close to three billion
dollars in cash...and in an area that's full of so
much promise. The ability for that company to be
on its own and the ability to consolidate these
companies AND, I think, the ability of...[fumbling
noise] god forbid I press this, it will eject...it
says Eject Number One--that's me,
so...[laughter]...that what we're gonna be able to
create on V-U-E, VUE, which we think will over
time the little acronym will...will...
Jean Marie Messier: -You can see that everyone is making progresses in
French.
Barry Diller: Yeah, definitely. Let's see...[laughs] so...the
ability of us, together, to strategize what is
possible; and somebody asked me earlier, they
said, well where does your heart really lie in
this? I mean, do you have an entertainment heart
or this interactive heart?' And I said, `I've been
saying long before this,' and people who have
heard me bam around in conversations and
presentations et cetera, I said that `the truth is
that I certainly have a long established
entertainment heart. I started in the
entertainment business when I was round
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twenty. I haven't lost my curiosity for it. I
started my interest in interactivity and
developing that part...god forbid I would call it
`muscle,' whatever it is...'blood' and whatever in
'92 right after I left Fox, long before there was
an Internet or long before there was a functional
Internet. So, I actually...I have genuine, so to
speak, heart in both places and...uh...so I think
that the ability to do that and to play this role
in VUE...uh...gives us the ability, I think, first
of all, to have a great good time in addition to
the great good luck that we've had heretofore and
that we have in this in competing all over the
world. The other thing that I would say is
that...as it relates to my time and people's
questions about, well what am I gonna do with my
time? And how am I gonna split it? The truth is
you can't chop time in percentages...you
can't...it doesn't...that's not real. I basically,
up until now, spent about fifty percent of the
time in interactive and about fifty percent of the
time on the entertainment side. The interactive
business has grown, the entertainment business has
grown. ON some days I'll spend ninety percent on
interactive or ninety percent on VUE. But I
believe, and we've talked a good deal about this,
that I'll be able to do both areas of my
responsibility without it being a burden on
either. I actually think it will help either. So,
that's the thing on time. You may want to ask
additional questions; to the extent I can answer
them I'll try but that's my thought on that. As
far as the people I get to work with...on the side
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of this new venture. First of all, I've known
Ronny Meyer, he's been my friend for, I don't
know, too long a time...not too long but a long
time only in terms of judging the width of the
tree. But we've been friends for a very long time.
And Pierre Leskuer, who I've known for several
years now and I would say that...actually
pre-dating this transaction we began to be
friends...we have some French in our lives
commonly although my wife is Belgian though the
language is...that side of the language is
French...uh, and she has a flat in Paris and, so,
I have...I certainly believe that Pierre is my
friend and I'm...in the process of what we've put
together I think I'm gonna enjoy that association.
Michael Jackson, who is sitting here, recently
came to USA to run its entertainment businesses,
to be in charge of them, because I felt they
absolutely had to have the full time attention of
a single leader and Michael Jackson is that
leader; previously he ran what I think is the best
channel in the world, Channel Four. I thin we have
organized this in such a way, in the conversations
I've had with Ron and some conversations I've had
with Stacy, and some conversations that Michael
and I have had...I think we have an original
organization for this; it is going to be
tension-free. It is certainly hopefully going to
be lively and opinionated and full of the passion
of argument, which is where I think the best stuff
comes out of almost anything creative. But I think
it's organized at the outset correctly. And, as
far as the
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interactive side, I'll deal with that later in
terms of its executives here in this part. With me
this morning is John Miller, who is the CEO of
information and services on the interactive side
of USA. So I think, I mean, although I've probably
forgotten something, I'm happy...I'm happy to
shake your hand actually although I don't want
them to take any pictures because they'll be THAT
picture, you know? That kind of bromidic picture
and whatever--we'll avoid that. But we will be
happy to answer any questions that you have...
Jean Marie Messier: Yes? ON the left side?
UM2: [question in French]? [now speaking English] Last
question if I may ask to Mr. Diller. It was in the
communique this morning about the French producers
basically about, I quote, `an Americanization of
French cinema.' I just wanted to have your views
on that, I mean, after Mr. Messier, if I may.
Thank you.
Jean Marie Messier: Not only...don't apologize to ask the question in
front of Pierre Leskur, that's...that's no problem
there. Uh, as I was saying, the fact that this
question is raised just shows that Pierre Leskur
presents and work in L.A. with all the USG team
over the last year...has ben very successful. But
what we have achieved, which was not obvious at
the beginning, the French guy, even knowing the
business, coming to L.A. has been totally
overcomed...and that several very positive
outcomes have been reached through Pierre's action
in L.A. one of the most important for me being the
integration between the US and
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European side, between Universal Studios and
Studio Canal. That job needs to go ahead, needs to
be pursued, and no one here has better skills than
Pierre Leskuer to continue this job. And, on a
more personal basis and that's something that we
discussed with Barry and which is very substantial
with not only Barry's views but with our own
internal management's views and with what has
happened, for example, during our discussions with
Ecco Star, as an entertainment group we need to be
able vis a vie distributors to deal as one single
entity. And I've discussed so many times this
point with Edgar Broffman, who's smiling right in
front of me. And we had been successful in
breaking the deal with Ecco Star only because at
the end of the day we had been able to make the
arbitrage between our technology interest, our TV
and film interest...Doug, our music interest, our
games interest. We need to act as one single
worldwide content group. So we will create a
worldwide entertainment committee, which is going
to be gathered, let's say, half a day every month
and whose main goal is going to gather all the
strengths, all the entertainment CEOs of the
group...starting by Barry and Ron...Doug,
obviously, and [unintelligible name] Turen on the
publishing side, to make those positive arbitrage,
to extract the synergies between our content
businesses, and to have one single voice in our
relationships with the key distributors. And I've
asked Pierre, who has been very successful in
integrating the movie
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business on the two sides of the Atlantic, to be
along with me in managing and sharing this
committee. This is very important to us and this
is very important to the group. On your Franco
French movie industry question, may I just say
that, as we all know and as we all understand, the
Franco French exception culturale is dead. We are
today in a time of cultural diversity. What does
that mean? It means that you need to be both
global and local. The wonderful success of Doug
Murray's team is the UMG is not only the world
leader, UMG is a local leader in six out of the
seven main markets around the world. WE need to
understand that this is true on the movie side
too. The interests of Vivendi Universal is, on one
hand, a rather wonderful US major...very
successful, very dynamic. Vivendi Universal
Entertainment in the US...and, at the same time,
to keep Canal presence, Studio Canal being the
first support of the French movies industry. But
as Canal proceeds as sole and first support of the
Polish movie industry in Poland...of the Italian
movie industry in Italy. And, for me, let me put
it in perhaps a too aggressive way: that kind of
statement sounds a little bit archaic in the times
that we are living and in those times of cultural
diversity. And the anxiety underlined there is
totally artificial and has no basis. Yes?
UM3: Mr. Messier, Nicola Bai from Lezico. I have
another Franco French question if I may. You
remember a few years ago your good friend Rupert
Murdock had to take the US citizenship. Do
you--because of
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his investments in this country--do you think that
you will need to do the same?
Jean Marie Messier: No, I don't think so. I'm pleased that Rupert is a
US citizen. I'm proud of my French passport and,
uh, I think that obviously in this case we do not
need that. May I underline very...very narrow
difference between Rupert and I. I think that he
is basically the owner of this group. I think that
I'm the chairman and CEO of Vivendi Universal on
the behalf of my shareholders and vis a vis any
question relating to nationality and passport...it
has...it makes a difference. Part of Rupert's US
citizenship was, was linked with regulatory
issues. So, let me be clear, I[`m proud of being a
new Yorker--even more so after nine, the eleventh
and I'm proud to have my family living here. We
are a global group. I'm the French chairman and
CEO of the global group.
Barry Diller: I would only add that my wife is a Belgian and in
Belgian law if you are married, you can have a
dual citizenship. So...I'm going there. Yes? Oh,
more in the front.
Justin Opelar: Justin Opelar of Variety. Just a question--with
the backdrop of tremendous success in the film
division over the past year...any concerns about
continuity? You know, given that this is a, you
know, substantial management change and kind of,
you know, a new structure. And then, one more
question, just now that you guys are getting into,
you know, the television business to some extent,
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there's gonna be some ad exposure there, that had
long kind of not been a very significant part of
your revenue model. Any kind of concerns about,
you know, exposure to that very cyclical market?
Barry Diller: On the first part, um, as I read someplace
that...what I'll do is fix something--try to fix
something that ain't broke--one the contrary, as
I've talked with both Ron and Stacy, I'm gonna
cove to their culture in this area and, in fact,
I'm just a complete supporter of what they have
done. I can't imagine that there will be any
disruption of any kind in any area on any level or
in any particular. It just simply seems to me
actually impossible. As it relates to ad exposure
I think, Jean Marie, you can answer it as far s
the percentage of advertising exposure. I would
only say one thing about the, the nature of cable
television networks is that they have, of course,
two streams of revenue; one comes from advertising
and the other comes from subscribers. And it is
the strength of those revenue streams that are
guaranteed, so to speak, that makes what is, of
course, a terrible advertising climate which is
gonna continue for a bit. It isn't gonna continue
forever, obviously, but it certainly allows the
level of program commitments that Mr. Jackson has
been engaged in, in juicing together in just such
a short period of time from being made to create
the assets that when there is an advertising
economy with some robustness inside of it that, in
fact, the advertising revenues
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will shoot back in; but it's protected to a degree
by subscription revenues.
Jean Marie Messier: And just to give you some orders of magnitude,
Vivendi Universal Media activities will represent,
'02, basically, 32 billion Euros of turnover. The
turnover of USAI Entertainment assets are two
billion Euros. One set of that is advertising
driven, that's six hundred or so, that's in
order...just to fix order of magnitudes...two
percent of Vivendi Universal media turnover. So,
our exposure to advertising as a group is going to
jump to double from two to four percent. I'm very
fine with that and I'm very fine that it keeps to
Vivendi Universal its very strong defensive
qualities in the current environment.
Barry Diller: In the back?
UM4: At four percent maybe it can go higher. What is
your opinion of the broadcast network business?
Would you like to own one? Do you see any value in
those businesses right now?
Jean Marie Messier: Can we just stop asking when we are presenting to
you what we think is a decisive step, to ask
about...yeah, but please, don't you have another
one in mind? No? WE do not have another one in
mind. Two thousand one has been a year for Vivendi
Universal of integration in addressing what was
one relative weakness on the US market...the lack
of integration in the TV and movies filed, and a
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lack of access to distribution. So the combination
of the acquisition of USAI Entertainment assets
and the strategic partnership with Ecco Star...we
are fully addressing this relative weakness. Let's
work primarily for 2002 to the internal growth of
our group. And I can tell you we have a goal in
2002 in terms of revenues gross, which is to
continue to reach and to reach in 2002 a
double-digit organic growth. I think that at the
end of the day such a step as of today is critical
for our strategy. But the key strengths of the
group? That's to make double-digit organic growth
every year. In 2002, we are going to focus on that
one.
Barry Diller: On this side...
Jean Marie Messier: And you tell us in the back of the room if you
have any question coming from the outside?
UF: [inaudible]
Barry Diller: OK, another couple of questions here and then
we'll go outside.
George Stallag: hi, gentlemen, George Stallag with the Hollywood
Reporter. Quick question. Can you talk a little
bit about specific projects that you guys might
have been discussing already that leverage the
strength of the now-combined operations? I
remember you guys have kind of indicated that we
might see a Fast and Furious TV series, something
like that. What's the latest there? What else
might you guys have in mind?
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Barry Diller: I mean, I think that there's a...there are a
series of things that we've already started to
discuss that we actually have been discussing for
a little bit before...uh, there is a vast library
at Universal in terms of the past both in terms of
films and television. There's this wonderful cream
that has risen to the top in the last few years,
of those titles, that can play their role in terms
of potential television series et cetera--I mean,
rather than give you specific titles and such. But
the work has already begun on that. We think that
the prospects are rich and we would think that
over the next period you'll begin to see them
develop.
Jean Marie Messier: ON the left side? Yeah, we will go back to you
right after. Don't worry.
UM5: Why the reluctance, Mr. Messier, to discuss the
financing? Can you give us some details on how
you're going to make this...
Jean Marie Messier: -The financing is very easy. You have, basically,
three parts in this deal: the first one which
represents two-thirds fo the global compensation
of the acquisition is by bringing back to USAI
those 330 million shares of USAI that we are
owning. And Barry is going to reduce the capital
of USAI with that. That's basically giving back
the shares that we received at the time of the
initial transaction. The second part of it, in
rough terms, of the 32-million vivendi Universal
shares that we are swapping with John Malone...to
get more USAI shares that we also bring into the
transactions. It's a 1.6 billion
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dollars consideration in treasury stock. And,
finally, you have a cash portion of 1.6 billion
dollars, which is an amount equivalent to the one
was given to Seagram in 1998. Uh, the 1.6 billion
dollars of cash has been pre-financed by the sale
of our `B Sky B' stake last week. And using our
treasury stock to gain Liberty Media as a core
shareholder of Vivendi Universal and helping this
transaction to happen, [unintelligible] for our
shareholders a very good use that we can do with
our treasury stock. At the end of the day, this
transaction is not putting pressure on Vivendi
Universal. On the reverse, what it allows us to do
is to increase our EBDA target for 2002 by more
than ten percent. It's to increase our net income
in 2002 by roughly 200 million dollars. It's to
increase the net free cash flow of the group in
2002 by, let's say three hundred and fifty million
dollars. At every level of the PNL and of the cash
flow that you may look at, this transaction is
very positive to VUE shareholders year one.
Barry Diller: Why don't we go to the question behind that we
didn't do and then, as Larry King says, we'll go
to the phones. Yes?
UM7: Thanks, Thierry Arnot with Le Tribune and the
French Business Daily. Uh, I was wondering whether
you could both elaborate on the reasons why you
decided against integrating the whole of USA
networks into Vivendi Universal. And the second
question related to that is do you look at it in
the same way, in a sense, you are looking
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at TV back in '97...in other words, let's grow the
assets separately with a view to later
repatriating them into Vivendi Universal?
Barry Diller: Well, I would say, as to the first question, that
one of the foundations of this--and I think the
art of the transaction--was the ability to have
these USA Interactive assets stand on their own
separately as a pure business line. And this area
of interactivity, while it has certainly gone off
like a rocket over the last several years in oft
spoken bubble terms is nevertheless the real deal.
Interactivity and the...the convergence in all of
these, so to speak, media of information and
entertainment and direct selling. I mean,
interactivity as an organizing principal, standing
on its own, is a wonderful business proposition
and we've been able to build real companies. It's
very important in this transaction and in the art
of it I believe that we were able, in a sense, to
carve this exactly correctly. And, so, there is
this USA Interactive company that I hope and I
believe will go one for a very, very long
time...growing and building in that...truly
important sector of world business; and each year,
I believe more so. It has...it does not have, as
it relates to the second part of your question,
some of you will want to add to that...it does not
have the...the foundation principal that the other
transaction had. I think much of the
misunderstanding and...and, as I've said in a
quote that I gave about this, totally unfair
criticism of that transaction. The original
transaction was it was ALWAYS
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understood that in that transaction these assets
would return. It was understood, by the way, and
implied that the best of all possible worlds would
be if they increased in value because if they
decreased in value. in fact, that would have been
a tragedy. In fact, they did increase in value. As
Jean Marie has said, there had to be a step one
before step two and those shares that were part of
that transaction are what, to a very large degree,
paid for its repatriozation. So, uh, I think
that...as it relates to the same thing happening
all over again, while there's nothing in the world
that I would preclude, because there certainly is
the ability for anything to happen, USA's course
is clear and independent. USA Interactive is clear
and...independent and there are no such agreements
or discussions or et cetera or anything that is a
foundation principal with regard to that.
Jean Marie Messier: Just two quick points, the first one to underline.
Those assets have grown in value and we are paying
them with the USAI stock, which as grown in value
at the same time; that's the reason why from a VUE
shareholder's point-of-view this transaction makes
a lot of sense. And on the interactive side, just
to make you sensitive to one point, we are very
much looking with Barry to build between vivendi
Universal net and USA Interactive the right
commercial long term agreement between our
respective interactive and Internet-based
businesses. If we were able to play it right,
through the right cross-marketing agreement, do
you realize that together those assets in
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terms of unique visitors reach will rank on the
worldwide basis, number four? Right after the
three ISPs: AOL, MSN, and Yahoo! If we play as a
ring to a large extent VUE Net content online
Internet sites and the wonderful transactional
businesses of USA Interactive, we will be together
number one of the non-ISP in terms of Internet
reach. I think that it gives you an idea of the
potential which does exist here through commercial
agreements between us and it does explain to you
the reason why I've been discussing with Barry and
requesting through the transaction to get for the
benefits of my shareholders--of VUE
shareholders--a very significant amount of
warrants on USAI Interactive to get Barry my
share, my stake or my shareholders' stake, of the
value that you are going to create also on the
interactive side.
Barry Diller: And we're hopeful that it comes.
Jean Marie Messier: Outside?
Barry Diller: Yes, let's take it. Okay?
Operator: [through phone connection] We have a question
coming from Richard Berrier, you may ask you
question. Please state your company name.
Richard Berrier: Um, yes, Richard Berrier, Los Angeles Times. Just
a couple of questions. I was a little unclear on
Mr. Armstrong's role in the structure? Can you
clarify that? I also wanted to ask what the value
of this venture will be. And the third question
is, um, if you could
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perhaps elaborate on some of the most fundamental
changes we can expect to see at Universal Studios
including in the recreation group?
[recording abruptly ends]
[end of tape, side A]
[start of tape, side B]
[recording device is activated]
Barry Diller: Well, first of all, I think as it relates to Mr.
Armstrong I would direct you to AT&T.
Jean Marie Messier: It was Jackson perhaps?
Barry Diller: Did you say Jackson?
Richard Berrier: I'm sorry, Mr. Jackson.
Barry Diller: Sorry, then...the role of...I thought I...
Jean Marie Messier: Michael, you're not leaving for AT&T are you?
[laughter]
Barry Diller: No-no-no. Michael Jackson is not Michael
Armstrong. Uh...I think I spoke about it earlier.
Michael jackson is going to be the senior
executive on the television side of the combined
Vivendi Universal Entertainment and, as it relates
to changes at Universal Studios, we've talked
about that. I think that, in fact, I certainly
anticipate none. I would direct you later, after
this press conference you can all gather around
Ron Meyer and Michael Jackson and they'll tell you
what they think because they're the responsible
parties.
Jean Marie Messier: And with Ron as number two to Barry you can
imagine that it's going to be a strong team.
Value, which was your in the
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<Page>
middle...uh...in between question? Uh, let's be
over simplistic that's the only way because this
financial transaction is a little bit complex.
Barry has a lot of very nice people around him who
love sophistication in the financial deals.
Barry Diller: let me just say we're evenly matched. [laughter]
Jean Marie Messier: That's quite simple. You may have seen different
figures in terms of value of the deal. Let me take
the three key figures: 10.3 billion dollars is our
value of the deal based on the thirty days average
for any stock transaction within the global
agreement. We took a thirty days average because
that's usual and because it can be an unaffected
price after the leak of last week--that's 10.3.
Ten point eight billion dollars would be the value
of this transaction if you take Friday close stock
prices. The problem for us with that is that
Friday close do include part of affected stock
price on the USAI level. Basically, it gives a
10.3 to 10.8 billion dollars range. The only other
difference between USAI approach and our approach
is that obviously we are taking into account the
value of the warrants that we are receiving on USA
Interactive. Twenty four million of those
warrants, the first trench of twenty four million
is not so far, even closer, since the opening of
today from being in M&A. They have an objective
market value, very significant value to our
shareholders that we are taking into account.
USAI, looking at the sales of the entertainment
assets on a stand-alone basis is not taking into
account
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<Page>
this value of the warrants; it's a discrepancy of
basically eight hundred million dollars, which may
leave you to the 11.6 or 11.7 billion dollars,
which has been the other figure mentioned for the
value of this deal. Obviously, between the...on
the warrants, the two approaches are correct. USAI
shareholders can look at the value they are
selling the entertainment assets; and we are
looking, as VUE shareholders, at the total amount
of what we get, what we pay for, and what we
receive. And, so, we do integrate those warrants
with, as I was just mentioning...have a true and
very impressive value. I think that those warrants
are long term, ten years, let's you...Barry? Time
to grow and grow and grow again the value of USA
Interactive businesses.
Barry Diller: The way we look at the warrants, obviously, from
USA's point-of-view--the only issue for the
warrants is dilution and the dilution clicks
in...first of all, a very long time from now and
also at prices that...that are certainly higher
than our current share price. So, for us, the
effect of the dilution, given our share base, is
fairly small and, therefore...and its timing is
distant. And, so, consequently, for us in valuing
the transaction we feel we legitimately value it
at a different basis. This is...well, people would
say how could you value the same transaction two
different ways? Well, the truth of it is of course
you can; there are two different securities, they
have different characteristics, the considerations
are different in terms of valuing
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<Page>
them on either side; and it's, of course, open to
interpretation. It's what keeps analysts happily
at work and alive. Uh...were not concerned at all
by this and we think the simplistic explanation of
this is the one that will carry.
Jean Marie Messier: This range is basically sixteen to eighteen times
eBDA pre-synergies and twelve to fourteen times
EBDA post-synergies. And, one more time, we are
paying mostly...with a stock that will receive
initial...and I think that whatever you look at
this transaction, all of this makes a lot of
sense. But speaking about financing and structure
fo the transactions, that's also the...the
occasion to thank all of our internal teams who
have worked on these transactions but also the
outsiders and I'm thanking on our side...to our
financial advisor, Goldman Sachs, as the global
advisor and Morgan Stanley as the equity advisor
to our legal advisor, Kravas and my favorite
lawyer and partner, Fiza Assad who is in the back
of the room...our audit team of Arthur Andersen
hereto such a transaction is a teamwork inside and
outside. And I want to thank all of them; they
made a tremendous job in such a minimal period of
time...that's impressive.
Barry Diller: I would...I would certainly add to that the one
thing that I can say on both of our behalf is that
we have improved employment in new York City
profoundly over the last month. [laughter] And, on
our side, we could not have done this without
Allen & Company as our financial advisor and our
special committees advisor...Bear Stearns.
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<Page>
With particular respect to this, because fo this
transaction...because of USA's board membership,
which leave literally four directors who are, so
to speak, unconflicted--meaning that they don't'
have interests on any side of this because between
he Vivendi board members and the Liberty board
members and me and....uh...other USA associates.
There were four people but we were very lucky,
there were four great people...uh...led in this
case by Bill Savoy...and...and his leader, Paul
Allen, who were one part of the special committee
and, on the other side, was General Swarzkopff,
who is a member of our board and Ann Busqet. And
they...when you're on a board and someone calls
you up and says, `you know, we need a special
committee so you're actually...you really have to
go to work.' And they really did in the last ten
days...had to put in an enormous amount of
work--they were the group that actually, on the
USA side, voted this transaction into being. So a
special thanks to them as well as Wachtel Lipton
without whom I might be standing here but I'd be
far thinner in many different respects.
Um...but...and one addition that I would add in
this case. Here in this room is Guillaume Aniso,
who's the CFO of Vivendi Universal and, in
Californian, is victor kaufman, who is the vice
chairman of USA and, in respects, in the same
way...and without their creative abilities and
without there...
Jean Marie Messier: -Their endless discussions...night discussions...
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<Page>
Barry Diller: -Their endless discussions for sure...there would
have been, of course, no transaction. It would not
have been possible without both of them and I'm
glad I'm going to be associated with both in the
future. So, just one more question maybe we should
do or...?
Jean Marie Messier: There was one...
Barry Diller: Sorry...
UF1: [inaudible in background]
Barry Diller: Okay, then we'll let you all go to life.
Operator: Thank you, our next question comes from Frank
Arienz. You may ask your question. Please state
your company name.
Frank Arienz: Frank Arienz, Washington Post. I have two
questions for Mr. Diller: one, what changes will
we see on USA networks and when to tell us this
deal has happened? And, second, as former head of
paramount, Fox, this seems to put you back up at
the power level of folks like Michael Eisner and
Dick Parsons. How does that feel to be back?
Barry Diller: I didn't thin I went very far away to be honest
with you but you can all have your own little
ideas about that. I've been reading about all of
that it, like, makes me laugh every time I see
that. Um...it...uh...I can only say the truth, it
really does make me kind of smile. That's about my
only thought about it. As far as USA networks, I
mean, I really think that you should, after this,
ask Michael jackson. I mean, he's...he has been at
work at USA networks...how long Michael?
Michael Jackson: Six weeks.
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<Page>
Barry Diller: Six weeks. And it's all done and he has a new
program schedule for you and he'd be happy to tell
you all about it. No...he...he's got this network
at a very interesting time. We, last year, I think
with some hindsight wisdom, we lost wrestling and
that hurt our ratings; but I thin the ideas for
USA network and the discussions that he has been
having recently and in every discussion that I've
been around and heard, I think you would expect
real growth for USA networks. It will begin at
some point next year; it isn't gonna come fast
because it doesn't' happen that way. Solid growth
in terms of networking comes over a period of
time; but, from the early work ai have enormous
confidence in their prospects. So, we have, what?
Paris?
Jean Marie Messier: One other question in Paris? That's right?
UM*: [asks question in French]
Jean Marie Messier: [answers question in French] [returns to
English]...so, on this one, the basic answer was
what about the depth and credit rating relating to
this transaction? I just emphasized the fact that
there is 1.6 in cash and 0.75 in preferred
stock...twenty Euros below the market interest
rate, which is basically 2.5 billion dollars, out
of which the cash part has been pre-financed by
the sales of Partifal the [unintelligible] sale of
Partifal [unintelligible] AB stake. AS far as the
global depth ratio of the group is concerned, our
target is to have in '02 a depth to EBD ratio well
below three times and especially we are focusing
to reach that target ahead of the end of the first
half of 2002, which means
30
<Page>
that Vivendi Universal will end up its program of
selling its non core asset in the first half of
'02; it will give us very comfortable triple B
credit rating targets that we are very comfortable
with. [Short question to questioner in French]?
Ah...doing in French and English if you don't mind
for our Paris people? Uh...[continues to caller in
French] [returning to English] So, no cleaning of
balance sheet because the balance sheet is clean.
That was the first part of my answer and the
second one is we are committed to issue full US
gap earnings starting Q1 of '02. We already, in
fact, worked on the basis of US gap accounting
methods in '01 in order to build our track record
at the time of this year, at the time of the
release of our first full quarterly US gap in '02.
So we are already applying all US gap
methodologies, including those relating to
amortization. Another question in paris? That's
all? Is there perhaps a final question here? None?
There was...
UF*: [asking question in French]
Jean Marie Messier: Oui...I'm just going to give in French about the
Pierre Leskuer role...[answers in French]
[returning to English] So now we go back to
English for one final question?
UM8: Maybe I missed this earlier but what is the
reporting relationship, Mr. Diller? Who do you
report to?
Barry Diller: Who does who...me?
UM8: Him.
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UM8: Directly. Okay.
Barry Diller: That's it. Um...thank you all very much. We
have...[laughter] What? Did I do that wrong?
Jean Marie Messier: Excellent!
Barry Diller: It was a simple...simple answer. Simplicity is
best. We're gonna have a five minute break and
then we'll do a USA Interactive...hopefully a
brief press conference but thank you all very
much.
Jean Marie Messier: thank you...thank you everyone.
Barry Diller: What's that? No, this is nice, this is very nice
us together. You don't want that handshake. We'll
do that.
[recording device is deactivated]
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