Talk about timing. Vivendi Universal’s board is reportedly set to narrow down the field of contenders for the purchase of its U.S show business empire, which it acquired through its purchase of Seagram three years ago.
But on Monday, the company announced it had received formal notification that the Internal Revenue Service is seeking an additional $1.5 billion in taxes, connected to its 1995 sale of 156 million shares of chemical firm DuPont.
That’s $1.5 billion, plus interest.
Eight years ago, DuPont spent $8.8 billion to redeem the shares from Seagram, the Canadian beverage and media company, which Vivendi acquired in 2000. The proceeds were treated as a taxable dividend, with 80 percent reported as an income-tax deduction; taxes were paid on the remaining 20 percent in 1995, said Vivendi.
Seagram recorded a $1.5 billion deferred tax liability related to the deduction, not to be paid until Seagram sold its DuPont stock. In April — shortly after word began to circulate about the impending IRS claim — Vivendi stated that $1.5 billion in taxes would have been paid in 1995 had the transaction been reported as a sale or exchange instead of a dividend.
In a terse statement issued Monday from Paris, Vivendi Universal restated its belief that “the tax treatment is fully compliant with U.S. tax laws in force at the time.”
The company added that it believed the dispute could be resolved so as not to have a material adverse effect on its financial statements.
The auction of Vivendi’s Hollywood properties, which include Universal Studios, seem to be proceeding nonetheless. It’s shaped up as a race between General Electric’s NBC and a team led by Vivendi vice chairman Edgar Bronfman Jr., who once ran Universal when it was owned by his family. Vivendi is also considering proposals from cable company Liberty Media and media group Viacom, according to Reuters, as well as approaches including an IPO spinoff or joint venture. Vivendi has been trying to auction the assets since May, but the $14 billion asking price hasn’t sped thing along.
According to Reuters, Vivendi CEO Jean Rene Fourtou will present proposals to his board Tuesday afternoon before deciding whether to pick one for exclusive talks or simply narrow the field.
“The goal is still to reach a decision by Tuesday,” said one source, according to Reuters, “but it is not a necessity.”
There’s No Place Like Home (New or Used)
Sales of existing single-family homes rose to a record high last month, and prices increased at a double-digit rate compared with a year ago, according to the National Association of Realtors (NAR).
The announcement comes on the heels of last week’s Commerce Department report showing home construction in July at its highest level since April 1986. (See “Housing Market Leading the Way.”)
Sales of existing homes rose to a seasonally adjusted annual rate of 6.12 million units in July, 5 percent higher that the pace of 5.83 million units in June and 13.8 percent higher than the July 2002 pace of 5.38 million unit. The previous record pace was 5.94 million units, set in December 2002 and equaled in January 2003.
David Lereah, the NAR’s chief economist, said the sales jump is consistent with other housing data. He did note that “when mortgage interest rates first began to rise from record lows, it appears some buyers jumped into the marketÂ before interest rates moved even higher.” Mortgage interest rates have risen a full percentage point from their weekly low, notes Lereah, but “given the strong underlying demand for housing from a growing number of households, it’s hard to gauge just how much ‘fence jumping’ may have accounted for the sales record.”
NAR President Cathy Whatley, owner of Buck & Buck Inc. in Jacksonville, Florida, said that interest rates now appear to be leveling off. “The good news is mortgage interest rates have been moving up and down in a narrow range over the last few weeks, with the 30-year fixed rate averaging less than 6.3 percent,” she said. “We think this pattern will continue into 2004, hovering in the range of 6.3 percent. That will preserve favorable affordability conditions and strong home sales, but it will be somewhat slower than the record pace during the first half of this year.
The national median price for existing homes was $182,100 in July, an increase of 12.1 percent from the July 2002 figure of $162,400. “That’s the strongest national price increase since November 1980,” noted Lereah, “a reflection of tight inventories in a record market.”
- Struggling hospital chain Tenet Healthcare announced that it will sell five hospitals to Health Management Associates Inc. for $550 million as part of its plan to turn itself around after nearly a year of bad news. According to Naples, Florida-based Health Management, the hospitals — one in Florida, two in Tennessee, and two in Missouri — generate about $400 million in annual revenue and have a total of 1,061 hospital beds.
- Miles D. White, CEO of drug maker Abbott Laboratories, said his company would soon spin off its hospital supplies business to shareholders. White said he did not have another deal in mind, according to The New York Times, but the paper cites analysts who speculate that Abbott’s $3.4 billion nutritional business — which includes the Ensure and Similac brands — could be the next to go.
- SSA Global Technologies, a Chicago-based business automation software maker, announced its agreement to buy supply-chain management specialist EXE Technologies in a deal worth roughly $47 million; EXE shareholders will receive $7.10 per share in cash. Privately held SSA added that it will merge Dallas-based EXE with a subsidiary that markets enterprise software aimed at manufacturing industries.
- Expert-services firm LECG Corp. filed on Monday with the Securities and Exchange Commission for an IPO worth as much as $98 million. LECG did not set a price range for the sale or specify how many shares it planned to offer. The Delaware-based company has applied to be listed on the Nasdaq National Market under the symbol “XPRT.”
CFOs on the Move
- Michael A. Bless, senior vice president and CFO of Rockwell Automation, has decided to step down so he can spend time with his family, the company announced. He will remain with the company until after a transition period following the appointment of a new CFO. Bless has served as CFO since the spinoff of Rockwell Collins in 2001.
- Unicru Inc., a Portland, Oregon company that offers web-based hiring systems, named Douglas Shafer as its new CFO. He was most recently CFO at Tut Systems.
- Sirit Inc., a Canadian radio technology company, said its president and CFO are leaving during a major restructuring. Michael Houle, replaced as president last week, “has left Sirit to pursue other opportunities,” the company said in a release. Now CFO John Fairchild has decided to quit rather than move to Mississauga, Ontario, from Vancouver as the firm consolidates finance functions, reports the Canadian Press. The company said it will seek a consulting contract with Fairchild, who has agreed to help with the transition as Anastasia Chodarcewicz takes over as CFO in Mississauga.
- Genaera Corp. of Plymouth Meeting, Pennsylvania, announced that Christopher P. Schnittker, the biopharmaceutical company’s senior vice president and CFO, is leaving the company on August 29 to pursue other business opportunities. Schnittker joined the company in June 2000 after serving as the director of finance at Global Sports Inc. of King of Prussia, Pennsylvania. Leanne M. Kelly, Genaera’s controller, will serve as interim CFO.
- Lawrence C. Best, senior vice president and CFO of Boston Scientific Corp., has been elected to Haemonetics Corp.’s board of directors. Braintree, Massachusetts-based Haemonetics designs, manufactures, and markets automated blood-processing systems.
- O’Currance Teleservices, a Salt Lake City, Utah provider of inbound telemarketing products and services, announced it has hired Blake Rigby as its CFO. Previously, Rigby was CFO for Feature Films for Families, a Utah-based film production and distribution company. He was also the CFO and treasurer for Utah-based Challenger Schools, a private, for-profit school company.
- LookSmart, a search engine provider, announced the appointment of William Lonergan as CFO, effective September 22. Lonergan served most recently as CFO of Tacit Knowledge Systems, a provider of enterprise collaboration management solutions.