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Frances CGE, Havas to Merge

French conglomerate Compagnie Genérale des Eaux is better
poised to compete as a world media leader after last week's expected announcement
that it will merge with Havas SA, itself a massive French media player.

The two will combine their television interests, including
CGE's major cable-systems operations in France and Britain and a 34 percent stake in
Canal Plus owned by Havas. The companies had acknowledged on Feb. 25 that they were in
merger talks.

If the deal, signed March 9, is finalized, the merged
entity will have annual sales of $8 billion, putting it just behind Bertelsmann AG's
$10 million in annual sales, which earns it the crown as Europe's leading media
power. However, the European players still trail far behind U.S. giants Time Warner Inc.
($24 billion in annual sales) and The Walt Disney Co. ($20 billion). Both of those
companies also merged with other large media companies over the past few years.

"What's unfolding around us ... is a battle waged
by a fair number of giants. When you're battling with giants, you can't
follow," CGE chairman Jean-Marie Messier said at a news conference in Paris
announcing the merger.

Combining the two companies will help CGE to solidify its
position in Europe as a major cable and direct-to-home satellite player. It will become
the majority shareholder in the largest European pay TV company, Canal Plus, and it owns
one of the largest MSOs in the French market. CGE is also a massive utility company in
France, and it owns British MSO General Cable, which it has been looking to sell. In
addition to its stake in Canal Plus, Havas is a major player in publishing, advertising
and travel.

Prior to the merger, CGE already owned more than 30 percent
of Havas. CGE had earlier exchanged a 15 percent stake that it owned in Canal Plus for
shares in Havas.

Messier will oversee the merged entities. Eric Licoys,
previously managing director of Havas, has moved into the position of chairman, taking the
place of longtime Havas leader Pierre Dauzier.