NEW YORK — Nobody has seen anything like the Vivendi-Universal auction.
In the words of Michael J. Wolf, head of McKinsey & Co.’s media and entertainment practice: “It’s historically fascinating. At no time in history has there been a public auction of such a large set of entertainment assets.”
It’s not your run-of-the-mill deal as jockeying, backstabbing, leaking, dog-and-pony shows and lots and lots of number crunching add to the allure of the entertainment industry’s biggest public auction ever.
Hollywood directors may already be casting for a bigscreen version of John Malone, Marvin Davis, Kirk Kerkorian and Edgar Bronfman Jr. The extras, bankers, lawyers and accountants, would provide work for all the unemployed actors in town. Already, the vast agglomeration of interest in Universal is providing steady cash flow for every big bank and law firm Stateside, and quite a few in Europe.
Everything about this is a first: It’s a forced sale after the near bankruptcy a giant media conglom that was brought to its knees by a wildcatting CEO. There’s a crush of five bidders with others on the fringe — all big names. Three offers, led by Davis, Bronfman and MGM, have heavy private equity backing — the first time so many financial firms have partnered to chase a movie studio.
Beats them all
The takeover of Time Inc., the battle for Paramount and the internecine warfare over DirecTV “were exciting, but not like this,” said one media exec.
As the process heats up, so has the obsession with handicapping the race. Every newspaper has a favorite. Wall Streeters and entertainment industry insiders all have an opinion, molded in part by constant spin from interested parties, news reports and, they like to think, common sense.
Conflicting reports in Tuesday’s papers raised as many questions as they anwsered. Did Malone bid for music — or didn’t he? Did GE bid — or didn’t it? Does MGM want all of Universal — or just pieces?
It’s tough for an outsider to have a clue. “You never know where information comes from. What’s an industry source? A person close to the deal, or familiar with the talks?” said one frustrated media fund manager.
In the spin war that’s a hallmark of this process, every bid has its own pitch and reps stay adamantly on message:
- MGM: This is a transformational deal. We need it the most and want it the most. Our financing did NOT fall through.
- Liberty: This is a transformational deal. We need it the most. We’ve been saying so for months and months. We really have tons of cash.
- Davis group: We were first out of the gate with a solid offer. It’s still solid. Brian Mulligan knows those assets. The folks at U like him. Financing is sound. Davis might rub you the wrong way, but he’s just one of several financial partners.
- Bronfman: Edgar was a strong exec before he sold. He’s close to Fourtou. Folks at U like him. The money is there.
- GE: (Less clear) We want the cable nets. Maybe vertical integration isn’t such a bad idea. Obviously, we can afford it.
Close to the vest
Despite all the spin, however, there’s surprisingly little clue as to what the French are thinking. And that’s the only thing that really matters.
“I know for a fact that Fortou would never give anyone the inside track and that he will only think in terms of what is best for Vivendi shareholders. You can say that’s from ‘a person close to,’ no ‘a person familiar with the situation,'” joked a person close to one bid that’s not considered a front-runner.
The opacity is a function of a tangle of financial, fiscal and legal issues in France and the U.S. and the complex determination of how much each Universal business — film, TV, theme parks, music — is really worth.
That’s hashed out in ‘due diligence,’ which starts with a book of preliminary financials Viv U compiled and sent to credible bidders.
“It’s the first step in a sale. Somebody make a book, which you immediately ignore,” said Dennis McAlpine of McAlpine & Associates. The book is written by the company’s own bankers and tends to paint an overly rosy picture.
A series of meetings with management and division heads is followed by the first round of non-binding offers, which came in Monday. Vivendi will select a few bidders to for a second round and they’ll be invited to a data room full of financial documents they can read but not remove. Then, more detailed presentations with tougher questions, followed by final offers. Many expect new alliances among the various bidders who want a piece but not all of the Universal pie.
It’s nearly impossible that a sale will be wrapped by the end of July as Vivendi had hoped. “This is a Labor Day deal,” one banker said glumly.
He added, “It looks exciting from the outside. From the inside, it’s just a bunch of people fighting over money.”