Apple's reported bid hitting mixed signals
A bad case of crossed wires on Wednesday marked the latest episode in a string of acquisition-related drama for Vivendi Universal, as comments reportedly made by one of the French conglom’s board members about an bid for Universal Music Group from Apple Computer were swiftly rebutted.
Wire service Bloomberg reported that Claude Bebear, a prominent exec at French insurance giant AXA and a Viv U director, expected a bid from Apple for the major-label giant in the near future worth $6 billion.
But later in the day, Bebear sternly denied through an AXA rep that he ever said a bid was in the works. Shortly thereafter, Apple chief executive Steve Jobs seconded the denial.
“Apple has never made any offer to invest in or acquire a major music company,” Jobs said. “The press statements this morning attributed to Vivendi board member Claude Bebear are untrue, as Mr. Bebear has confirmed in a later report.”
Apple shareholders seemed relieved at the company’s swift denials, which appear to put the kibosh on a deal for the near future at least. The company’s stock dipped early in the day, then recovered as news unfolded to end virtually flat at $13.30. Shares sank by 8% when reports first surfaced of a possible bid.
Wednesday’s events was only the latest in a string of rumors surrounding the potential sale of UMG; the latest round was touched off last week by reports that both Apple and its larger tech rival Microsoft were sniffing around the label group.
Equally perplexing has been news that a trio of UMG execs led by Doug Morris are trying to engineer their own private equity and debt-backed deal. Several sources poured cold water on their efforts, however, claiming the amount of fiscal discipline required to run the music company under a management buyout may not sit well with managers more accustomed to working with — and being remunerated — more like talent than investors.
Meanwhile, reports surfaced this week indicating that Apple could face legal action from EMI act the Beatles, of all people, if a UMG deal were to go through.
Dispute dates to a suit more than two decades ago, in which the Fab Four’s London-based record label Apple Corp. said the computer maker was infringing on its trademark. The suit was eventually settled for $26 million — and a promise from Apple Computer never to go into the music business.
It’s not yet clear what kind of damages the company could face for entering the tune racket; one legal source familiar with the situation said it might be possible to set up a music operation so the branding conflict could be avoided.
Reps for Apple and members of the Beatles weren’t immediately available for comment on the suit. Apple reps have declined to comment at all on any potential bid for Universal Music.
Universal has been on the block for months, as Vivendi continues to dig itself out from under a massive debtload and sell off all its U.S. entertainment assets. But there are still questions as to whether the company can afford to sell off these assets piecemeal, since doing so may trigger an additional $2 billion-plus in assorted tax payments on capital gains.
According to Bear Stearns analyst Mark Harrington, if Viv U chose to sell its entire stake in Universal Music it would seriously limit its flexibility to sell U Studios and/or cable channels.
The French company also has legal headaches that could delay a deal. Barry Diller’s USA Interactive on Tuesday filed a lawsuit to force Viv U to pay up a share of a $620 million preferred stock tax payment that Diller says he’s due. Viv U has denied it has an obligation, but at the same time is believed to have indemnified any would-be buyers of Viv U Entertainment against the obligation to make the payment.