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Liberty Sues Vivendi Over '01 VUE Deal

Liberty Media Corp. took another tack in its negotiations to purchase all or some of the assets of Vivendi Universal Entertainment last week: it's suing VUE's parent company.

Liberty filed suit in U.S. District Court in Manhattan on March 28, claiming that VUE's parent — Vivendi Universal S.A. — misrepresented its financial situation when it struck the deal that created VUE in 2001.

As part of that 2001 deal, Liberty exchanged its equity interest in USA Networks Inc. — including cable channels USA Network, Sci Fi Channel and Trio — in return for Vivendi stock.

Now Liberty claims Vivendi and then-chairman Jean-Marie Messier misrepresented the company's financial situation, failing to disclose the French media giant's staggering debt load.

"The financial situation at Vivendi was nothing close to the rosy situation that defendants had portrayed it to be," Liberty said in the suit, adding that it never would have done the deal if it had known the truth.

USA Networks and Vivendi reached a deal in December 2001, in which USA swapped its interests in the cable channels in a complicated deal then valued at about $11 billion. Liberty, which had an interest in USA Networks, ended up with about 3.6 percent of Vivendi's outstanding stock, worth about $1.6 billion.

Liberty's stake is now worth about $546 million.

The suit comes at a curious time for Liberty, which is in negotiations along with several other parties for the VUE assets. So far Texas oil magnate Marvin Davis is the only suitor to make a formal bid — about $20 billion, including assumption of $5 billion in debt.

Vivendi, in a statement, said the suit is nothing but a negotiating ploy.