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Bidders jockey for pole in Viv U derby

GE, Liberty, MGM, investors eye parts and whole co.

NEW YORK — The envelopes please…

Bidders for Vivendi Universal’s U.S. entertainment assets dispatched their first formal “expressions of interest” Monday, with the French conglom receiving five letters.

NBC parent General Electric, John Malone’s Liberty Media, Kirk Kerkorian’s MGM and two private equity investment groups led, respectively, by Marvin Davis and Edgar Bronfman Jr., are ready to play ball, according to a person close to Vivendi.

Davis, Bronfman and Liberty are looking to buy both Vivendi Universal Entertainment and Universal Music. Other offers were for VUE, which includes Universal Pictures, television and theme parks.

Viacom, which just wants U’s niche cable network Sci Fi, didn’t bid. It may jump in later for a cable deal depending on how the auction evolves.

MGM’s step up to the table created a major splash on Wall Street.

Many had counted the Lion out after a major financial partner, KKR, bailed last week. MGM is said to be backed by cash from Provident Capital and, possibly, Summit Capital, as well as from the deep pockets of Kerkorian himself.

This deal would transform MGM from basically a stand-alone studio, with a stellar library and a famous brand, into a true entertainment conglom. But its offer may be lower than the circa $10 billion (excluding several billion in debt) that others are expected to bid.

Vivendi would not comment on who bid, or for how much.

A U merger would also take Liberty to the next level, creating a real operating company instead of a mish-mash of minority holdings. Liberty execs have been aggressively talking up their interest in VUE for months.

“Malone couldn’t show his face at the Allen & Co. conference if he doesn’t make a big play” for the assets, joked an industry insider. The Universal sale is sure to be a hot topic at investment banker Herb Allen’s annual media mogul confab next month.

The bids are nonbinding. “We say to them, ‘We looked at the numbers, we think it’s worth this much.’ Then Vivendi may narrow it down to three or four, and there’s a lot more due diligence,” said one banker.

Click to skip chart

Handicapping the frontrunners in the race to acquire Vivendi Universal’s entertainment assets.
Liberty Media: John Malone’s got the cash and the desire, but who’s gonna run all those assets? (Odds 1-1)
Marvin Davis: Brian Mulligan’s ties to U may help, but was Davis’ bid too early and obvious? (2-1)
Edgar Bronfman Jr.: He’s got the connections and backing. He’s two years older, but wiser? (2-1)
GE/NBC: Can afford to play coy and bid low, but Bob Wright’s broadcaster can offer GE stock. (5-1)
MGM: Don’t count the Lion out. MGM may need the deal the most, and Kirk Kerkorian could pounce in Round 2. (10-1)

Field to be narrowed

Viv U hopes to conclude the sale by the end of July but has stressed that it won’t be rushed into a deal it doesn’t like. Company is likely to narrow the field at a board meeting on June 30.

One open question as the auction moves forward is who will run Universal in the case of a victory by GE, Liberty or the Davis group. That could be a concern of Vivendi’s going forward since the French conglom may retain a minority stake in the assets.

Liberty has strong ties to Barry Diller. Malone also publicly mentioned Jeffrey Katzenberg as a potential chief exec for U — which the DreamWorks partner flatly denied.

The Davis team is said to have feelers out to possible top execs.

Barbs flew among rival bidders, building up their own offers and tearing others down. One Wall Streeter intimated that U staffers wouldn’t take kindly to working for MGM chief Alex Yemenidjian. “That’s ridiculous,” said a Lion supporter. “And, at this point, it doesn’t really matter what they want.”

Inside opinion

A U staffer agreed that the studio is open to Yemenidjian and played down spin from the Bronfman camp that Universal insiders are universally eager to get their former boss Bronfman, a known quantity, back in the saddle.

“Yes, he’s liked, but no one forgets that he got us into this mess in the first place,” the person said.

Most bidders seemed irate about the GE offer, which no one took seriously until several weeks ago and which now poses a real competitive threat.

“What the hell are they doing? They have always said they don’t believe in vertical integration, and they hate to take on debt,” groused one banker.

Vivendi shares fell 3.49% Monday to $18.55.

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