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Vivendi Seeks More Investors in Parks

Firm needs cash to pare debt from media-related acquisitions and fund theme park expansion.

October 26, 2002|Richard Verrier | Times Staff Writer

Vivendi Universal has stepped up efforts to court investors for its marquee theme park business, as the media giant finds itself under continuing pressure to raise cash.

Universal executives have been in talks with private equity groups about investing in the theme parks or expanding their existing stakes, according to sources familiar with the discussions. An infusion of cash from new investors would do two things for Vivendi: help cut the company's $19-billion media- related debt and fund an ex- pansion of the capital-intensive theme park business.

Emerging as the leading suitor is Blackstone Group, a private equity investment firm in New York that wants to expand its stake in Universal's theme park business, the sources said. It already owns a 50% share of Universal's two theme parks in Orlando, Fla. Universal also operates parks in Universal City, Spain and Japan.

Blackstone representatives reportedly have been talking to Universal executives for weeks and recently returned from a visit to Universal's newest theme park, in Osaka, Japan. Executives from Blackstone and Vivendi declined to comment.

The talks come as Vivendi Universal faces pressure to raise nearly $12 billion from selling assets. Efforts by new Chief Executive Jean-Rene Fourtou have been hampered by a poor business environment worldwide.

The latest setback came Friday, when Vivendi was forced to delay the sale of U.S. publishing house Houghton Mifflin because offers have fallen far short of expectations. Without the extra cash, Fourtou could have a tough time waging a possible bidding war with Britain's Vodafone for control of Cegetel, a profitable French telecom business.

Theme parks, although hit hard by an industrywide slump since the terrorist attacks, have been a profitable business for Vivendi. They contribute more than $300 million a year in cash flow and are worth $2 billion to $4 billion, according to analysts' estimates.

It's unknown what arrangement Vivendi may agree to, but sources say any deal is not expected to involve an outright sale. The parks, well regarded in the industry, are seen as a growth business by Vivendi Universal Entertainment Chairman Barry Diller and Universal Studios President Ron Meyer.

In a vote of confidence in the business earlier this year, Vivendi agreed to develop three major new attractions at its theme parks in Universal City and Orlando next year.

By courting more outside investment, Vivendi is seeking to limit its exposure to the business while raising cash that would finance expansion. Like industry leader Walt Disney Co., Universal has been aggressively scouting for sites for a possible theme park in China -- considered the next frontier in an industry that has matured in the United States.

For investors such as Blackstone, which has been a long- time investor in the theme park industry, it is considered a good time to increase investments because values are depressed.

"These are good, well-managed properties," said industry consultant Bill Coan of Orlando. "I think the selling point is that they've gone through the bad times. There is a great value for these properties."

Other entertainment companies have found ways to retain ties to theme parks without taking on the costs and risks of managing them. Time Warner, for example, sold its Six Flags parks years ago but still receives a licensing fee for use of its characters and brands.

One of Disney's most successful theme parks, Tokyo Disneyland, is fully owned and operated by a Japanese company, which pays Disney a licensing fee.

Universal, however, is not considering a similar licensing model but favors its pattern of recent years of seeking third parties to defray costs.

For example, Universal Studios owns 24% of Universal Studios Japan and has a lucrative management deal but invested only about $90 million in the $1.7-billion facility. The remainder of the park is owned by investors and the city of Osaka.

Universal also operates Universal Mediterranea, a resort near Barcelona, Spain, that this year added a second 500-room hotel as well as a water park to the existing Port Aventura theme park. Universal has a 37% stake in the project; other owners include Spanish bank La Caixa (which owns 40%) and Anheuser-Busch Cos. (16%).


Times staff writers Sallie Hofmeister and Corie Brown contributed to this report.

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