Bonjour, M.
Le Monopoly
FROM PUBLISHING
TRENDS (DECEMBER 2002)
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.”
©2002
Publishing Trends
