NEW YORK — Bring on the cafe au lait.
Vivendi Universal’s board of directors will have a lot more to ponder than previously thought as it huddles in Paris this week to consider disposal options for its entertainment assets, including whether or not to exit the business at all.
Because if the suddenly energized team from NBC has its way, Viv U would be a major — if minority — partner in one of the most ambitious vertically integrated media plays since Viacom merged with CBS.
Sources close to the GE broadcasting group say the combined new entity would be worth up to $60 billion and would allow Viv U several possible exit routes over the next two years by which to monetize its position. These include issuance of preferred debt, an IPO or straight disposal for cash and/or stock in the future firm.
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And while the Peacock is loath to put up the kind of cash that its rivals claim to be coughing up, supporters of the NBC-VUE merger contend that Viv U’s bankers and other creditors would put as much faith in stock in the new entity as they would cash. That has evidently given CEO Jean-Rene Fourtou pause for thought, since NBC has apparently already been invited back for a second round of talks.
In the few days since first round proposals were submitted from five bidders, formerly hush-hush punters such as NBC and MGM have come out fighting for their case, making it clear to Viv U that they are indeed serious about their offers. MGM, which claims to have the ability to put more cash on the table thanks to overhead cost savings, is aiming to create the biggest film and TV library in Hollywood and is evidently prepared to offer an all-cash deal.
Under Peacock chief Bob Wright’s wing, sources say Universal studios would look to produce up to 20 pictures a year and evidently wouldn’t shy away from taking bigger risks on large, big-margin franchise pics.
Key to NBC’s plan is leveraging off its broadcast network and existing platter of cable nets such as CNBC, Bravo and A&E.
Temptation to cash in
The question is whether Viv U can resist the temptation for a far bigger chunk of immediate cash from private equity bidders like MGM, Edgar Bronfman Jr. or Marvin Davis. Bids for VUE from Liberty, MGM and the financial bidders are believed to range between $12 billion and $14 billion, with up to $8 billion of that in cash.
Nevertheless, NBC’s is a sexy proposition that could sway at least some on board: Given that Viv U will still be a major entertainment player in France through its ownership of Canal Plus, having some vestigial interest in Hollywood could be advantageous. NBC has indicated it would offer operational and marketing support to Universal Music Group should Vivendi opt to keep the unit until market valuations improve.
The question will come down to just how dire Viv U’s liquidity position really is and whether it’s prepared to sacrifice a bigger chunk of short-term cash for the bigger long-term gain NBC is promising. Virtually all offers for VUE will include some paper in the new business so that Vivendi can avoid a hefty tax payment.
Though NBC sees John Malone’s Liberty Media as its main rival for VUE, the Peacock may be counting on the fact that the ill will between Vivendi and shareholders Malone and Barry Diller may prejudice the board against doing a deal with them.