Vivendi Seeks Control of Orange's Dailymotion -- Update

By Ruth Bender

Vivendi SA swooped in with an offer for Orange SA's video-streaming site Dailymotion, according to people familiar with the matter, pledging to develop the French startup globally while making sure it stays under full French control.

Vivendi, which has had its eye on Dailymotion for years, last week made an offer to buy a controlling stake in Dailymotion after the French government forced partially state-owned Orange to consider offers from European companies, said the people familiar with the matter.

Vivendi has made an offer valuing Dailymotion at around EUR250 million ($272 million), one of the people said. The owner of French pay TV group Canal Plus and Universal Music Group wants to develop Dailymotion globally in cooperation with similar services it already controls or has stakes in, such as German movie and television streaming website Watchever or Vevo, according to the person.

Vivendi's offer comes as the French government for the second time in two years scared a foreign company away from buying a stake in Dailymotion, echoing an incident that has cast a shadow over French startups' efforts to woo foreign investors.

Hong Kong-based telecommunication company PCCW Ltd. Monday pulled out of talks with Orange to purchase a stake in Dailymotion, after the French government publicly urged Orange to look for European buyers for the site.

The French government's strong public stance prompted PCCW to reconsider its approach.

"[A]n environment where policies appear to favor a French or European solution is discouraging for international business participation," PCCW said in a statement. "We will therefore withdraw from our discussions with Dailymotion and its current owners."

The collapse of the PCCW talks marks the second time that a near deal between Orange and a foreign company has fallen apart after intervention from the French government, a setback for a country that is trying to attract more foreign investment to boost its economy.

In 2013, then-Industry Minister Arnaud Montebourg prevented Orange from selling a majority stake in the site to U.S. Web giant Yahoo Inc. After the deal fell apart, Mr. Montebourg said the U.S. tech firm might have "devoured" a French jewel. Local media have since referred to the incident as the "Dailymotion affair."

The blockage created a furor both inside and outside France, with some American companies and venture capitalists saying they had become more reluctant to make purchases in the country.

After Mr. Montebourg left the cabinet last year, the French government signaled it was more open to the idea of a foreigner joining with Orange in Dailymotion.

Dailymotion appeared close again to finding a foreign buyer last month when Orange's management told its board that it intended to enter into exclusive talks with PCCW over a deal to sell a 49% interest in Dailymotion, according to people familiar with the matter.

But it was French Economy Minister Emmanuel Macron who last week urged Orange to explore European buyers before entering into the final phase of negotiations with a foreign investor, allowing Vivendi to come forwards with an offer.

Vivendi's Canal Plus has been interested in buying Dailymotion for years but failed to reach an agreement with Orange. Orange wanted to hold on to a controlling stake while Vivendi also wanted control, according to people familiar with the matter.

If Vivendi's new offer is accepted, the purchase of Dailymotion would mark the company's first strategic acquisition under Chairman Vincent Bolloré. Mr. Bolloré, who has been tight lipped about what he has in mind for Vivendi, in recent weeks has come under fire from a minority shareholder.

Orange is expected to review Vivendi's new offer at a board meeting Tuesday, said the person familiar with the matter, along with potential rival offers. Orange declined to comment Monday.

It wasn't immediately clear how many other potential partners had come forward since Mr. Macron stepped in. According to people familiar with the matter, French financial-services company Fimalac was also among interested bidders. Fimalac didn't respond to requests for comment.

The French government Monday defended Mr. Macron's decision to block Orange from entering into a deal for exclusive talks with PCCW. "This is a wise shareholder decision that has allowed for discussions with several potential bidders," a spokeswoman for Mr. Macron said.

Rick Carew contributed to this article.

Write to Ruth Bender at Ruth.Bender@wsj.com

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