Exclu talks begin though Bronfman's not bumped yet

PARIS — Denouement may be nearing for Vivendi Universal Entertainment as parent company Viv U prepares to announce its engagement to NBC .

The conglom’s board could as early as today eliminate a consortium led by Edgar Bronfman Jr., the only other active bidder, and begin exclusive talks with the Peacock and its parent GE.

The French company however, was hedging its bets even in the final hour, and on Monday would not rule out Bronfman’s prospects. Sources say Viv U wants to be as close to a firm deal as possible when it announces its chosen partner, which could explain why it required an additional week of negotiations with NBC despite having promised a decision on exclusive negotiations a week ago.

The Bronfman camp would not comment on the status of its bid, while NBC declined comment Monday. A Paris source said the Viv U board would meet either today or Wednesday. An announcement could be swiftly followed by an agreement in principle in “a matter of days,” the source told Daily Variety Monday.

The Bronfman offer, which values all of VUE at just over $12 billion and contains more than $5 billion in cash plus debt assumption as well as a small equity stake, would help Vivendi Universal reach its year-end debt reduction target of $7 billion more readily than NBC’s potentially riskier proposal.

Still, the Peacock, which has been Viv U’s preferred bidder for the past three months thanks in part to parent GE’s blue chip credentials, still looks to have the edge, despite its more modest upfront cash component (roughly $3 billion in cash and assumed debt). Viv sources have maintained that a merger with NBC could ultimately generate a higher shareholder return on the depressed VUE assets, while it believes GE’s chances of pulling off a successful stock spinoff is more likely than the other private equity-backed bids it considered.

Under terms of the NBC proposal, Viv U would hold about 20% of a newly formed media conglom valued at roughly with an annual sales of around $15 billion and profits of well over $2 billion. The new enterprise would theoretically have a private market value of around $45 billion.

Tough terms

But NBC’s terms are tough. The Peacock’s dealmaking team is said to be seeking full indemnification against a variety of outstanding legal and tax issues facing Viv U from shareholders and regulators. In addition, GE is loath to guarantee minimum floor valuations for each exit opportunity Viv U has under the scheme to sell down its 20% stake over the next several years.

Bronfman’s bid requires no leap of faith, as it includes a small equity position in a new entity with Cablevision’s programming assets, but promises a speedy IPO allowing Viv U to exit promptly.

A decision would bring to an end long months of speculation — and frustration — over Viv U’s designs for assets including Universal Studios, cable channels and theme parks.

Bidding war fizzles

Viv U had hoped keen interest in the assets would spark a bidding war as media moguls and wannabes vied to own a prized slice of Hollywood.

But Viv U’s asking price — upward of $14 billion — quickly cooled the ardor of suitors ranging from the oil billionaire Marvin Davis and Liberty Media’s John Malone and Barry Diller.

By last week NBC and Bronfman were the only two pretenders left.

Even then, the Viv U board dithered between them, provoking high tension that culminated with Bronfman’s public trashing of the Peacock’s proposal, Bronfman complaining that a merger with NBC would leave Universal “directionless.”

According to some sources the Viv U board was not impressed with Bronfman’s “unseemly” outburst.

Aide flies to Boeing

Separately, Edgar Bronfman’s chief spokesman Tod Hollin has accepted a job as senior VP of communications for aerospace giant Boeing.

U.S. media folk may have some sympathy for the frustration felt by bidders in the VUE sale, but the French business community believes Viv U topper Jean-Rene Fourtou is just watching his back.

“It’s easy to criticize Vivendi but looking at their history in Hollywood, right back to disasters like Carolco they’ve had some costly experiences,” commented an industry insider. “It’s understandable that they are proceeding with extreme caution today.”

Vivendi Universal’s share price rose 4.11% to x15.94 Monday on press reports that Viv U will come to a decision Tuesday. Overall the market was up 1.42%.

(Meredith Amdur in New York contributed to this report.)

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