NBC in VUE Lead

Aug 11, 2003  •  Post A Comment

Although the French owners of Vivendi Universal indicated from the start of the dragged-out auction process that they wanted and needed a significant amount of cash for the company’s U.S. entertainment assets, it appears they are ready to reverse course as the Aug. 18 deadline nears for the second official round of bids.
General Electric’s NBC division, which has said all along that it will not put up a lot of cash (TelevisionWeek, July 14), has emerged as most likely to make the deal.
While cable giant Comcast is still mulling a bid, and has hired former Universal Studios head Frank Biondi as a consultant, it appears unlikely it will meet Vivendi’s cash demand, particularly given Comcast’s desire to pay down debt and digest its mammoth 2002 purchase of AT&T Broadband.
Officially, other potential bidders are still in the race, including a group led by Edgar Bronfman Jr. But most sources now believe the Bronfman group will not have the money or the clout to make the deal. A group led by former 20th Century Fox owner Marvin Davis also appears highly unlikely to offer enough to get back into the game. And Viacom appears unlikely to bid.
The field has also been narrowed by attrition: Bidders who were once considered front-runners have backed away in recent weeks as Vivendi insisted on a minimum $14 billion price tag for assets that include a film studio, a television production company and cable channels USA, Sci Fi and Trio. Those who now are out of the bidding include MGM and Liberty Media.
Liberty, which is still in a lawsuit with Vivendi, put the brakes on a bid following its purchase for $7.9 million of the portion of QVC it didn’t already own, in part because the sale fulfills John Malone’s goal of transforming Liberty into an operating company (which was a big tax issue).
Another factor that could be holding Mr. Malone back: Rating agency Moody’s Investors Service has threatened to downgrade Liberty if it steps up to buy VUE, and Mr. Malone has made it clear he wants to maintain Liberty’s investment grade status.
Without anyone willing to meet the cash demand, it appears Vivendi’s French management instead will choose to get into business with one of the world’s best-known blue-chip companies, General Electric.
Both Vivendi and NBC declined to comment.
GE’s bid involves combining VUE with NBC’s collection of entertainment properties to create a new company that would be firmly controlled by GE. Despite published reports, it appears no cash would be paid to Vivendi. Instead, the French company would get a stake in the joint venture that it could monetize sometime later.
Some sources say that three years after the deal is completed, Vivendi could be given the option to cash out its stake one of three ways: (1) through GE buying out Vivendi directly, (2) through an initial public offering of the newly formed company, or (3) by taking GE stock.
Beyond that, specifics about the deal structure, including how much Vivendi debt GE would be willing to take on, as well as the value and size of a stake in the new joint venture, remain unclear. Sources close to NBC flatly denied deal details outlined in Friday’s issue of Daily Variety.