Will conglom unload its 20% stake in NBC U?

To sell, or not to sell. That is the $5 billion-$7 billion question.

Vivendi’s board of directors will address the matter of whether to unload its 20% stake in NBC Universal at a meeting Wednesday in Paris. But the French conglom has been fairly clear that it won’t make any decision official until at least Nov. 15, leaving GE, Comcast and Hollywood to bite their nails for another month and dissect the pros and cons of a deal.

The impact would be most transformative for Comcast, the Philadelphia-based cable giant. Investors have long griped that the nation’s largest cable operator should spend its cash to buy back stock, but Comcast has always wanted to buy an entertainment company. And at this point, with expectations fired up, it might have an even bigger headache if the deal doesn’t go through.

The company’s failed $54 billion bid for Walt Disney Co. in 2004 has been hanging over the stock for five years, according to a report issued Tuesday by analysts at BernsteinResearch. Its pursuit of Disney was seen at the time as tantamount to acknowledging publicly that it didn’t think cable pipes alone were a viable long-term business.

“If the (NBC U) deal were to go away, it would be the worst thing that could happen to Comcast,” said BernsteinResearch analyst Craig Moffet, who also notes that if the deal goes through as outlined, the cable giant will be getting the assets at an attractive price. “Unfortunately for GE, it looks like they’ll have bought high and sold low on their NBC U assets.”

The BernsteinResearch report notes that a deal would carry some major benefits for Comcast, allowing it to recast its video-on-demand windows for movies, accelerate its VOD advantage and possibly neutralize the threat from discount DVD outfit Redbox. It could allow Comcast to hedge against rising programming costs by owning its own broadcaster at a time when nets are asking for cash fees in exchange for retransmission consent. It would also strengthen Comcast’s programming brands.

The case against a deal is mainly twofold: the potential heavy regulatory burden the two companies would face if they did get a deal done. Regulators might call for arbitration and anti-blackout provisions in the event of programming disputes, possible divestitures of broadcast stations in Comcast’s markets, and other concessions that could erase some or all of the gains from combining the two companies in the first place.

There’s also the disappointing track record of past marriages of content and distribution, for example, Time Warner and Time Warner Cable — which is now a completely separate company — and News Corp. and DirecTV.

Vivendi and Comcast declined to comment. Reps for GE and NBC U weren’t immediately available.

Analysts value NBC Universal at $25 billion-$30 billion. If Vivendi decides to sell, GE would exercise its right of first refusal to buy Vivendi’s 20% stake for what analysts figure would be a $5 billion to $7 billion payout.

The new NBC Universal would be wholly owned by GE, briefly. The conglom would then sell a 51% stake in the new company to Comcast in exchange for a cash payment, of around $5 billion, and Comcast’s entertainment assets, which would be folded into the new company.

As that happened, the combined Comcast-NBC Universal (there’s been no name set yet) would be spun off into a separate joint venture. According to the BernsteinResearch report, the new entity would take on about $8 billion in debt from GE, rather than the $12 billion cited when reports of the deal first surfaced two weeks ago. And GE would likely have the right to sell more of its stake to Comcast over time.

Vivendi has clearly signaled it wants to sell, according to Wall Street observers. The French conglom can exercise its put option once a year until 2013 during a window that runs this year from Nov. 15 to Dec. 10. It considered a sale in 2008, but the economic conditions weren’t good. This time around, with Comcast waiting in the wings, the timing for Vivendi may be just right.

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