Vivendi has announced that it agreed to pay $686 million to resolve a tax dispute with the Internal Revenue Service stemming from its 2000 acquisition of Seagram.

The French media giant explained that the IRS, which was contesting a tax treatment applied by Seagram related to its sale of DuPont shares in 1995, had demanded payment of $1.5 billion in tax, plus interest. The $686 million settlement includes tax of $284 million and interest of $402 million.

The deal enables Vivendi to eliminate a $1.85 billion deferred tax liability on its balance sheet and frees it to sell the 16.4 million DuPont shares it still holds, subject to capital-gains tax provisions.

“It’s a double helping of good news,” Laurent Vallee, a fund manager at Richelieu Finance in Paris, told Bloomberg. “Vivendi is going to pay only $686 million; the group had provisioned more than $1.8 billion. The company is now completely free to sell its DuPont shares.”

That sale should result in pretax proceeds of about $700 million, Vivendi reportedly stated. “All capital gains on the sale would be fully covered by the deductible portion of the settlement payment and Vivendi’s U.S. tax loss carry forwards,” it added, according to Bloomberg.

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