Sides millions apart on stake sale to Comcast

Looks like Comcast Corp. and General Electric won’t be carving up the Peacock by Thanksgiving after all.

Vivendi has become a thorn in the side of the cable giant’s takeover bid for NBC Universal.

Vivendi and GE are said to be struggling in their negotiations for GE to buy back the 20% stake that Vivendi retained after selling the majority of Universal Studios to GE in 2004. As of last week, it looked like Vivendi was primed to unload that stake, after the French telco giant struck a $4 billion deal to purchase Brazilian telephone company GVT (Daily Variety, Nov. 16).

But according to reports in the Financial Times, among others, GE and Vivendi are as much as $500 million to nearly $1 billion apart in their valuation of Vivendi’s NBC U stake. GE needs to buy back Vivendi’s stake to proceed with its plan to sell 51% of NBC U to Comcast, which plans to merge its cable channels with NBC U’s assets. Comcast and GE were preparing for the announcement of an agreement last week, until it became clear that the negotiations with Vivendi would take more time.

Comcast and GE are said to have settled on a valuation of NBC U at about $27 billion-$30 billion. The range under discussion values Vivendi’s 20% at roughly $5.4 billion-$6 billion. Vivendi is said to be holding out for at least $6.3 billion.

Vivendi signaled its hard bargaining stance Thursday when the company’s chief financial officer Philippe Capron said at an investor confab in Spain that Vivendi had not made any firm decision on what to do with its NBC U stake. In an interview later with Bloomberg News, Capron raised the specter of Vivendi playing spoiler in the Comcast-GE talks. “We are not forced to do anything. We could just say no,” he said.

Under the 2004 sale agreement between GE and Vivendi, Vivendi has an annual three-week window in which it can trigger an initial public offering for its stake, or negotiate with GE to buy back its stake. That window opened Nov. 15. According to the Financial Times, the agreement stipulates that the sides each choose an investment bank to provide an independent valuation of the stake. If those valuations are less than 20% apart, GE and Vivendi have to split the difference and settle on a price in the mid-range of those two evaluations, according to the FT.

Insiders close to the situation cautioned that Vivendi’s negotiators may be largely be posturing to drive up the price. Some seasoned biz watchers say the Comcast-GE route provides a convenient exit scenario for the Gallic telco, whose execs have declared that its NBC U holding is a “non-core” asset.

The deal on the table for Comcast and GE calls for Comcast to shell out $4 billion-$6 billion in cash plus its cable channels (E! Style, Golf Channel, regional sports cablers among others) to the enlarged NBC U, which would take on as much as $12 billion in debt from GE. Deal also is believed to include a provision that would give GE an option to sell more of its stake to Comcast over a seven-year period.

Comcast’s appetite for sweetening its cash offer to help GE get over the hump with Vivendi remains unclear, but knowledgable observers said it was unlikely, given the investor jitters that the proposed deal has already caused for Comcast. There’s also no word if Comcast and GE have discussed any alternative deal scenarios that would allow GE to get around the Vivendi hurdle.

But Comcast and GE are both facing some pressure to make the deal happen after enduring such a highly publicized negotiation process since the news of the talks broke in September.

GE has now made it clear that it is ready to divest NBC U, which has always been an odd fit with the rest of the conglom’s manufacturing, medical equipment and finance-based businesses. Comcast has signaled its desire to move deeper into showbiz with programming, production and distribution assets.

Wall Street analysts have noted that the Philadelphia-based cable titan put the brakes on the growth of its share price with its unsuccessful bid for Disney five years ago. Investors wary of Hollywood’s unpredictable business cycles have been cautious on Comcast’s long-term growth prospects given its expansionary desires — and a failed bid for NBC U would only deepen that skepticism in those investor circles.

It’s known that Comcast execs have insisted that the proposed agreement include a safety-net clause that would allow Comcast to fork over less in cash if NBC U’s financials deteriorate significantly between the time the agreement is struck and when it is completed. If Comcast and GE get to the handshake point, the process of securing regulatory approval could take as much as a year as the union of the nation’s largest cable operator with NBC U’s wealth of cable programming assets — among them USA Network, Syfy, Bravo, CNBC, MSNBC and Oxygen — is expected to draw stiff scrutiny from the feds.

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