The prospect of a merger between European pay-TV giants BSkyB and Canal+ has been revived by Vivendi's acquisition of the 16.7 per cent Pathe stake in the UK company.

The deal sets

The prospect of a merger between European pay-TV giants BSkyB and Canal+ has been revived by Vivendi's acquisition of the 16.7 per cent Pathe stake in the UK company.

The deal sets up Vivendi, the French utilities and communications group, the largest shareholder in Canal+ with 34 per cent, as a potential power broker between the two pay-TV outfits.

Vivendi chairman Jean-Marie Messier said: 'With 17 per cent of BSkyB and 34 per cent of Canal+, Vivendi is bigger in European pay-TV than (Rupert) Murdoch with 40 per cent of BSkyB. The ball is clearly in Murdoch's court.'

Shares in both BSkyB and Canal+ rose following the deal, which saw Vivendi buy all Pathe's pay-TV interests, on Monday (7 June). Shares closed up 2.5 per cent to£5.83 in London and 6.9 per cent to Eu280.1 (£180.7) in Paris, respectively.

Talks between Murdoch and Canal+ chairman Pierre Lescure about a possible merger between the two companies broke down in March over the latter's insistence on management control (Broadcast, 12.3.99).

Vivendi is merging with Pathe on the basis of swapping three Vivendi shares for two Pathe shares, valuing the latter at Eu2.4 billion (£1.5 billion). Vivendi will fund the purchase with a Eu1.9 billion (£1.2 billion) capital increase.

As well as inheriting the 16.7 per cent share in BSkyB, Vivendi is planning to transfer Pathe's 20 per cent stake in French digital pay-TV service CanalSatellite to Canal+.

Fornier, a company owned by Pathe chairman Jerome Seydoux's family, will be renamed Pathe and buy back the company's cinema, themed channel and other interests, including French daily newspaper Liberation and football team Olympique Lyonnais, from Vivendi for around Eu534 million (£344.6 million).

Seydoux is expected to step down as chairman of BSkyB following the Vivendi/Pathe deal. He took up the post last year when Gerry Robinson left the Sky board.