By Kim Housego, Associated Press, 10/31/02

PARIS -- French media giant Vivendi Universal said Thursday it has agreed to sell U.S. publisher Houghton Mifflin to a group of financiers including the Blackstone Group, a private U.S. investment group.

Vivendi valued the deal at an estimated $1.73 billion, including debt but no further specifics were provided. Although the deal has yet to be completed, the announcement means that both parties are working toward a final sale.

"Vivendi Universal has entered into exclusive negotiations with the consortium formed by Thomas H. Lee Partners, Blackstone Group, Bain Capital and Apax Partners with a view to disposing of Houghton Mifflin," the company said Thursday.

Boston-based Houghton Mifflin is the publisher of "The Lord of the Rings" as well as a wide range of educational textbooks. Vivendi purchased Houghton Mifflin in 2001 for $2.2 billion including $500 million in debt.

Blackstone and Bain Capital declined to comment on the deal, and calls to Thomas H. Lee and Apax were not immediately returned.

In trading on the New York Stock Exchange, Vivendi's American depository shares closed down 27 cents, or 2.2 percent, at $12.12.

Vivendi, which is struggling under $18.6 billion of debt, last week announced the planned sale of its European and Latin American publishing businesses to French media and defense conglomerate Lagardere SCA.

In its statement Thursday, the company said the Vivendi Universal Publishing asset sales completed or under way since the beginning of the year amount to $4.2 billion. However, that figure includes the market value of the assets as well as their debt, which means Vivendi will likely receive much less.

The company had hoped to raise $3.42 billion for the sale of VUP in its entirety. But faced with bids significantly lower than that, Vivendi opted to sell the European-Latin American and U.S publishing divisions separately.

The proceeds come at a crucial time for cash-strapped Vivendi, which is locked in a battle against Britain's Vodafone Group for control of Cegetel, Vivendi's 44-percent owned telecommunications arm.

A Houghton Mifflin sale would provide Vivendi with desperately needed funds for a counterbid to Vodafone's offer for stakes in Cegetel. Both sides covet Cegetel's wireless subsidiary SFR.

Earlier this month, Vodafone announced an agreement to buy out fellow shareholders BT Group PLC and SBC Communications Inc. for $6.15 billion -- giving it a controlling stake in Cegetel. It had also offered Vivendi $6.6 billion for its Cegetel stake -- an offer Vivendi rejected.

But under a Cegetel shareholders' agreement, Vivendi has first priority in buying the shares. The media groups has until Dec. 10 to issue a counterbid. And Vivendi Universal chairman Jean-Rene Fourtou told union members earlier this week that there is a strong possibility the company will buy BT Group's stake in Cegetel, according to a source familiar with the situation.

Vivendi also said Thursday it plans to push on with the disposal of $11.9 billion worth of assets over 18 months to trim its debts and revive investor confidence.