Inside Move: Fourtou’s French kiss-off

Viv U topper holding out for $14 bil or may fly solo

NEW YORK — Here’s where the Vivendi Universal auction stands: A growing number of U.S. bankers think the French are toast.

Given the fact that Jean-Rene Fourtou has now upped the asking price to $14 billion and effectively blown off several prospective bidders, some Americans feel he may end up with no bidders at all.

There’s suspicion, in fact, that Fourtou is already examining the feasibility of an IPO — in short, going it without a major U.S. partner.

Viv U has already dismissed as “insulting” sub-$12 billion offers from Marvin Davis and snubbed even MGM, the most eager cash bidder.

The conglom is no doubt emboldened by its debt-reduction progress and improved outlooks from rating agencies. And, unlike a year ago, it’s not desperate to unload the entertainment assets just to stay afloat.

Plus, Fourtou believes that as media stocks have risen nearly 50% in 12 months, VUE’s value should reflect that.

So he’s holding out for that elusive $14 billion or planning to fly solo (or in combo with NBC) on an IPO — the rationale being that Viv U could avoid the usual 10% discount that occurs in private sale valuations.

But throwing in the towel on the auction risks a huge credibility problem with investors and current bidders, not to mention furthering the slide of morale among the troops at Universal City.

And analysts believe Fourtou’s $14 billion valuation is pie-eyed, given the declining health of the businesses due to lack of attention. The 10% additional value Viv U might get from an IPO (assuming Fourtou could pull it off in a year) might not justify putting off a sale.

Among the bidders, MGM is prepared to lever up its balance sheet to buy VUE. But its $11.5 billion offer for 93% of VUE already includes nearly $8 billion in debt. The only way it could up the offer would be to find an extra equity contributor.

Fourtou logically wants strategic players in the mix and has recently encouraged cable operator Comcast to have a look.

Of the other strategic offers, NBC is pitching only a non-cash joint venture, Liberty Media is adamantly opposed to going over fair-market prices and Viacom only wants the cable nets (the most valuable component).

So with a month to go before Fourtou has promised shareholders some kind of answer on VUE, would-be buyers are scratching their heads trying to determine whether Viv U’s coyness is an elaborate bluff.

In the end, French pride might ultimately matter more than prudence.

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