Shares in Vivendi Universal and its utility subsidiary, Vivendi Environnement, have jumped sharply after the parent company unveiled plans to shed its holding.

Vivendi Universal, which focuses almost wholly on media and entertainment, announced on Thursday the two-stage sale of its 40% share in Vivendi Environnement.

The parent company requires cash to pay down its debts and fund the planned acquisition of telecoms company Cegetel, and its stake in a waste and water company was seen as strategically incongruous.

Although revenues from the profitable utility firm were crucial to Vivendi's balance sheet, investors have approved the move, sending the shares of both firms up by 4% within the first few minutes of trading.

"This is exactly what both companies need," one trader said. "A good clean break."

Shares in Vivendi Universal closed up more than 6% at 13.8 euros, while Environnement rose 0.7% to 23.25.

Time to act

Analysts said they still had questions about the fine print of the plan.

But they have been cheered by management's willingness to take prompt action.

Vivendi has heavy debts, and is under investigation for alleged accounting malpractice, something that has dramatically undermined once positive investor sentiment.

Especially cheering was the fact that Vivendi also finalised a deal to sell US publisher Houghton Mifflin.

This, analysts said, leaves the company better equipped to seize control of Cegetel, in which it has a minority stake.

The telecoms firm is the object of a takeover bid from Vodafone, something Vivendi would like to trump.

Slimmed down

Vivendi plans to dispose of assets worth 7bn euros (�4.5bn; $7bn) by the end of the year - and a further 16bn euros-worth by the end of November 2004.

The Houghton Mifflin deal should bring in 1.7bn euros, a major step in repaying a 3bn euro loan it arranged as a lifeline in September.

Following the sales, Vivendi will be left with a group of telecom and television assets in France, and a movie and music business in the US.