Merger won't be Diller-dallying

Washington gave NBC clearance Tuesday to buy Universal, inscribing another chapter in the big book of mega media mergers.

NBC and parent company General Electric announced that the Federal Trade Commission would not oppose the proposed merger of NBC and Vivendi Universal Entertainment. With the regulatory approval taken care of, the Peacock said the deal should close in early May, even while Vivendi and NBC are still working to resolve Barry Diller’s outstanding interests in the company.

The marriage comes with a powerful dowry for NBC, which was the last major broadcaster without a sister movie studio. In addition to Universal Studios, Peacock also picks up U’s television and theme park assets.

“NBC and Universal are both performing at the top of their game. With our complementary assets and very similar business practices and cultures, I am confident the combined organization will execute extremely well from day one,” said Bob Wright, GE vice chair and NBC chair-CEO.

NBC had plenty to smile about in announcing — on CNBC, naturally–the FTC’s go-ahead.

The greenlight capped the most seamless and uncontentious media merger review in recent memory — even at a time when media ownership has been a hot-button issue. That’s largely because the FTC conducts its reviews behind closed doors, with no opportunity for public vetting.

The NBC U deal wasn’t required to go to the Federal Communications Commission for approval, as have most other media mergers. The FCC retains wide discretion over which media mergers it will review, and opted not to review this one.

The FCC review process, while not entirely public, offers the chance for interested parties to file queries or complaints to the commission, many of which are public documents.

The European Commission okayed the NBC U deal earlier this year.

GE had already indicated to investors that the FTC’s nod was forthcoming, and said at its recent earnings conference call that the merger should close early to mid-May. At close, NBC will pay Viv U $3.6 billion plus in cash and assume some $1.8 billion in VUE debt. An additional amount will be paid over the next decade if Viv U elects to sell off its 20% stake in the new NBC Universal.

“With this important step behind us, we will move quickly toward a close of the acquisition,” Wright said.

Feathering NBC’s nest

In announcing Peacock profits for the first quarter earlier this month, GE CEO Jeff Immelt said the newly merged media group should see total sales rise 25% and operating profits gain 30% over the next two years. Combined group is forecast to earn $2.4 billion in 2004 off of total revenues of $12 billion. Company said it has already identified around $100 million in immediate synergies (through cost savings and new revenue ops) in 2004, with another $300 million expected for 2005.

Immelt said there were six primary growth drivers for NBC U, including cost cutting in TV production, better film-library utilization, more cross-selling across film and TV and improved cable branding.

While there don’t appear to be any hurdles now standing in the way of the deal closing, Viv U and NBC must still resolve Barry Diller’s outstanding holdings in the old Viv U Entertainment.

Viv U in March filed a lawsuit against the VUE minority shareholder in order to remove the possibility that Diller could thwart future dealmaking for the new NBC Universal.

Diller’s InteractiveCorp. — which, together with Diller personally, holds a 7% stake in VUE — is due in court early next month to resolve whether the company must accept Viv U’s 20-year letter to cancel out any veto rights Diller claims over the Vivendi Universal Entertainment partnership due to preferred stock held by IAC.

Vivendi said removing these covenants is a condition to closing the sale of its stake in VUE to NBC.

NBC, however, could waive that requirement to facilitate closure of the deal.

Gallic firm insists that Diller’s refusal violates the VUE partnership agreement.

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