VUE Wants Higher Bids

Jul 7, 2003  •  Post A Comment

Vivendi Universal’s board of directors held its monthly meeting last Tuesday and had some advice for the six parties interested in purchasing the French conglomerate’s U.S. entertainment assets: Forget about bidding on the music group-and step up with more money.
An investment team that includes oil billionaire Marvin Davis and private equity firms Bain Capital, Texas Pacific Partners and the Carlyle Group was singled out as having to really beef up its offer to remain in the running for assets of Vivendi Universal Entertainment, according to people close to both the Davis camp and Vivendi Universal. VUE’s properties include a film studio, the television production operation that’s responsible for, among other things, the “Law & Order” franchise, and cable channels USA and Sci Fi.
Two people familiar with the Davis offer, which involved acquiring all of Vivendi Universal’s entertainment properties, including its theme park business and music unit, said the investment team is examining its options with an eye toward remaining a contender for the assets.
Mid-Month Revisions
Bidders are being given until the middle of the month to submit revised offers, a person close to Vivendi Universal said, with a winner possibly to be selected by the end of the month.
A spokeswoman for the Paris-based company declined to comment.
The news of the new bidding terms came as one of the suitors, Metro-Goldwyn-Mayer, asked Cablevision Systems to buy back its 20 percent stake in three cable channels run by Cablevision’s Rainbow Media Holdings unit for $500 million, freeing up both Cablevision and MGM to press ahead with their separate bids for the VUE assets.
Vivendi Universal’s management request for heftier bids clearly signaled that it felt the offers submitted by the Davis team, MGM, Liberty Media, General Electric’s NBC unit, Viacom and a second investment team headed up by Vivendi Universal Vice Chairman Edgar Bronfman Jr. were too low.
VUE Not Over A Barrel
But a person close to one of the bidders suggested that what also might be at work is Vivendi Universal’s desire to convey to both the bidders and Wall Street that its financial health has improved and that the company feels it is not over a barrel in terms of its debt levels or its need to dump VUE at a fire-sale price. “They are doing better and are less strapped with an immediate need for cash,” this person said.
The company said as much in a statement released shortly after the July 1 board meeting. In it, the company said, “At June 30, 2003, the targets for cash and debt levels have all been met and the situation of the main business units, in particular VUE and Cegetel [its phone business], is highly satisfactory.”
And in what observers said was likely a reminder to bidders that Vivendi Universal has options, the company added that its board continues to monitor the progress of both a VUE sale and an initial public offering of a piece of VUE, which Jacques Espinasse, Vivendi Universal’s finance chief, last month suggested was an option to maximize VUE’s value.
The decision not to consider offers for the music group was seen by some of the bidders as a bit of a setback; the Davis and Bronfman teams had viewed the music component as a key piece in putting together their respective bids, and Liberty surprised some by submitting an offer that also called for acquiring the music unit.
However, a source close to Vivendi Universal said the company firmed up its decision to hold on to the music group after the submitted bids fell short of the company’s expectations. Vivendi Universal’s management hopes the unit will fetch a higher price once piracy issues that have dogged the industry for some time are quelled, the source said.
Several Scenarios
Who will win remains anyone’s guess, since each bidder presents a different scenario for the assets.
For example, Viacom insiders say the company is only interested in the cable channels, which could complement its stable of channels ranging from TNN to MTV to Nickelodeon. Liberty, too, brings cable assets to the table, owning some channels outright and holding interests in others that could be complementary to the VUE assets.
NBC, meanwhile, has suggested VUE merge with the broadcast network and its cable channels in exchange for Vivendi Universal owning a stake in a newly created company that it could either keep or sell for cash or GE stock. Mr. Bronfman’s plan would have Cablevision contribute AMC, WE and IFC to the VUE assets to form a new company. And MGM has submitted a largely cash offer that would combine the studio with VUE’s assets.
Only the Davis team’s deal is made up mostly of financial players. But that team includes Brian Mulligan, former CFO of Seagram and former chairman of Fox Television, who has experience running a studio, including many of the assets now in VUE.