Canal Plus Eyes BSkyB Slice

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Mighty France-based pay TV company Canal Plus S.A. is about
to become the second-largest shareholder in direct-to-home platform British Sky
Broadcasting Group plc.

This would happen as a result of the recently announced
merger of French media and industrial conglomerate Vivendi S.A. and media group Pathé
S.A.

The deal would give Canal Plus, which is 34 percent-owned
by Vivendi, a 17 percent stake in BSkyB, making it a major shareholder behind News Corp.,
which owns 40 percent.

Vivendi already owns 29.88 percent of Pathé, and it is the
largest shareholder in Canal Plus. After the merger, Vivendi's stake in Pathé will grow
to about 40 percent, and Vivendi will take full control of Pathé's 17 percent stake in
BSkyB.

Vivendi plans to pass the BSkyB stake to Canal Plus.

Canal Plus and Vivendi jointly acquired 25 percent of
Pathé earlier this year, they said, to keep more of Pathé from going to French
broadcaster TF1. At that time, Vivendi officials said the company was not interested in
additional shares in Pathé.

Closer cooperation between Canal Plus and BSkyB is likely.
Discussions between the two companies to form an alliance failed earlier this year,
largely due to French state prejudice against a local venture losing control to a foreign
investor.

Vivendi chairman Jean-Marie Messier had named the
conditions under which cooperation among both pay TV ventures could take place: Canal Plus
would have to be in control of such a joint venture, and Vivendi's move bolstered that.

All of this is subject to the approval of French and
European antitrust officials. If the deal is approved, Vivendi plans to keep only Pathé's
pay TV assets.

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