What if there were an auction, but nobody bid?
That is the question facing Vivendi Universal as it awaits the arrival of a second round of bids due by Aug. 18 for Universal’s U.S. entertainment assets.
It is possible there will be some bids, by GE’s NBC and a group led by the Bronfman family, but even those are not expected to come close to the $14 billion in cash the French owners are said to be demanding.
Both the price and the way the French have conducted the auction process appear to have alienated and in some cases angered the initial group of bidders for properties that include a television production company, theme parks, real estate and cable channels USA, Sci Fi and Trio. Vivendi had taken Universal Music off the table after the first-round bids indicated low interest and even lower valuations for one of the world’s biggest music distributors.
The number of parties opting not to make an offer grew last week as the investment team headed by billionaire Marvin Davis and a group from cable giant Comcast said they would not submit bids by the deadline.
Comcast, however, may not be entirely out of the running. Late last week, shortly after issuing a statement saying it would not submit a bid, Comcast put out another press release announcing it was opening discussions with Vivendi about possibly combining cable assets and Vivendi’s content to create new channels and services such as video-on-demand.
A person close to Comcast said it was too soon to say what structure a deal would take and that no option would be ruled out. It was also unclear what role, if any, former Universal Studios head Frank Biondi would have in the discussions. Comcast hired Mr. Biondi as a consultant to help evaluate the VUE assets.
Comcast’s exploration of an alliance with Vivendi is the second such offer being considered by the French conglomerate. General Electric’s NBC unit has an offer on the table to combine NBC’s assets with VUE’s to create a new company in which Vivendi would own a minority stake. Vivendi could then be paid off in the future, either by GE’s buying out its stake or through an initial public offering of the new company.
Vivendi, based in Paris, has been widely criticized for its handling of the VUE sale, demanding cash-only bids and then that all offers start at $14 billion, among other things. The company also has repeatedly reminded-some say threatened-bidders that it could very well table the auction and instead explore an IPO. Some bidders were also unhappy that everything seemed to play out in the press.
The entire process has left many bidders alienated and frustrated and has called into question whether Vivendi can execute any sale. There were rumors late last week out of Paris that some of the banks backing Vivendi wanted to go back to major cash bidders and try to bring them back into the process. If that happens, it would mean Vivendi would be ready to take a lower price than it has demanded so far.
Mr. Davis’s team and Comcast join MGM, Liberty Media and Viacom on the list of would-be suitors that have indicated they are backing away from making offers.
The investment team led by Vivendi Vice Chairman Edgar Bronfman Jr. includes Cablevision System’s Rainbow Media holdings a consortium of banks led by Wachovia Securities and a group of private equity firms.
Alex Ben Block contributed to this report.