StudioCanal is subsumed within Universal Pictures

Europe's StudioCanal is set to lose its independence by being delisted from the Paris stock exchange and then folded into Universal Pictures, its stable-mate within the VivendiUniversal empire. The integration comes less than 15 months after StudioCanal was first floated on the bourse as a standalone force in international production and distribution.

StudioCanal's imminentmerger with Universal, which was announced shortly after the Paris exchangeclosed for business on Friday afternoon, creates a more streamlined entertainmentpowerhouse that will be headed by Universal Studios' president and CEORon Meyer and operate out of both Los Angeles and Paris.

The revised structure issomewhat different to the one proposed originally by overlord Jean-MarieMessier after his Vivendi acquired control of both Universal Studios and CanalPlus. At that time, his management team talked of having one foot in Hollywoodthrough Universal, another foot in Europe through what was then Canal PlusImage (StudioCanal's predecessor), but with no formal links between the two. Even though they shared a common parent, each studio was left free in effect to pursue its own ambitions.

Now, tellingly, StudioCanal'sonce autonomous US operations will fall under Universal Pictures'chairman Stacy Snider. Stephane Sperry, who has led StudioCanal'sinvolvement in US independent productions such as David Lynch's MulhollandDrive, will now re-relocate to the UniversalCity lot and report to Snider.

In Europe, StudioCanal'scurrent chairman and CEO Richard Lenormand will spearhead the development of French and European productions, supported by StudioCanal France's CEOBrahim Chioua and Michel Schmidt, executive vice president, StudioCanal.

Through its original LosAngeles-based filmmaking operation, StudioCanal struck alliances with variousUS producers such as Phoenix Pictures, Bel Air Entertainment, MandalayEntertainment and Spyglass Entertainment, while also co-financing individualfilms such as Paramount's $70m Lucky Numbers. In Europe, StudioCanal is an essential cog in thefilmmaking landscape well beyond its native France, co-financing the productionslate of the UK's Working Title, for example, not to mention this year'sPalme d'Or winner from Italy, The Son's Room.

Now, with the changes, itremains to be seen whether StudioCanal will be allowed to sustain its total investmentin film-related activities, which doubled last year to Euro 370m ($312m). StudioCanalhas several outstanding co-productions with Hollywood studios, but once thosefilms are completed it may be asked to focus much more on European productions.

On the distribution side, itlooks as if StudioCanal will be allowed to keep its European theatrical network,at least for now. According to Friday's official statement, StudioCanal'sdistribution apparatus will continue to co-exist alongside Universal's ownoutlet through UIP. "The new organization benefits from the particularstrengths of its dual international theatrical distribution networks, UIP andStudioCanal, with each capable of supporting specific types of motion picturesin their markets," noted the press release. On the video distributionfront, responsibility will continue to transfer from StudioCanal to Universal.

But in other areas, anyoverlaps will be ironed out immediately. StudioCanal and Universal'stelevision sales activities, for example, are to be collapsed into one andheadquartered in Los Angeles (with a European outpost in Paris) under UniversalStudios Television Distribution's co-presidents Philip Shulman andBelinda Melendez. They will both report to Universal Pictures' COO RickFinkelstein.

Before any of these re-structuringmeasures can be implemented, Vivendi Universal will first take StudioCanalprivate again by buying back shares at 14.5 euros ($12.26) apiece - the sameprice at which StudioCanal went public on April 19 last year - and delistingthe company. The total Euro 201m ($170m) buyout values the entire Canal Pluscontent and distribution subsidiary, with its 5,500 title-strong library, ataround Euro 1.6bn ($1.35bn).

StudioCanal, which reportednet profits of FFr 233m ($30.5m) on sales of FFr 22bn ($2.88bn) last year is currently82-percent owned by Canal Plus, with Vivendi only directly holding a 3% stake. Accordingto French stock exchange regulations, a company must hold a 95% stake in anysubsidiary it is seeking to delist. Once StudioCanal does go private, VivendiUniversal will be under no obligation to break out its financial performancewhen issuing quarterly reports.