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Six Bids for Universal Assets Expected

Only Bronfman and Davis are believed to be interested in buying the entire entertainment powerhouse.

June 18, 2003|Richard Verrier | Times Staff Writer

French media giant Vivendi Universal said it expects six bidders to compete for the company's U.S. entertainment assets by a Monday deadline for offers, setting the stage for one of the industry's most anticipated auctions.

At stake is the future shape of an entertainment powerhouse that includes the studio behind hits such as "American Pie," "The Bourne Identity" and "Bruce Almighty," along with the largest music company, home to Eminem and U2.

Although Chief Financial Officer Jacques Espinasse did not identify the potential buyers, industry sources say the six are: Liberty Media Corp., Viacom Inc., General Electric's NBC, Metro-Goldwyn-Mayer Inc. and two investment groups -- one headed by Vivendi Vice Chairman Edgar Bronfman Jr., the other by oil tycoon Marvin Davis.

Only the Davis and Bronfman groups want to buy all of Universal, giving them a possible edge over other bidders, insiders say. By selling the whole operation, Vivendi hopes to avoid tax complications and unload assets that would be tough to sell individually, including the financially struggling music division.

Also seen as a strong contender is Liberty's John Malone, who has said he wants everything but the music operation to bulk up his Starz Encore cable group.

Absent from the group is Apple Computer Inc., which had been in talks with Vivendi this year to buy or invest in the music group. Apple Chief Executive Steve Jobs pulled back after negative reaction from Apple shareholders.

Although Universal hasn't officially put its music group on the block, the group's fate could well be settled by the auction.

Vivendi's board will review bids this month and determine which ones to pursue. "We are not wasting any time," Vivendi's Espinasse said at an analyst presentation in Paris.

If the offers come up short, he said, the company might offer 25% to 30% of Vivendi Universal Entertainment to investors through a public offering. VUE includes the studio, theme parks and television channels.

Analysts, however, are skeptical of such a plan. "It would be a challenging thing to do in the current market," said Michael Nathanson, an analyst with Sanford C. Bernstein.

Vivendi CEO Jean-Rene Fourtou has slashed Vivendi's debt by billions through a number of non-entertainment asset sales. Fourtou has decided to refocus Vivendi around its more profitable French-based telecom and pay TV assets.

Vivendi reported Tuesday that its first-quarter net loss narrowed to $377.6 million on revenue of $7.37 billion, contrasted with a $965-million loss a year earlier on revenue of $17.3 billion.

Although the U.S. entertainment operation continued to lose money, French phone service company Cegetel saw its operating profit climb 30%, to $550 million in the first quarter compared with the year-earlier period.

The company said Vivendi Universal Entertainment pro-forma profit dropped 6% (on a constant currency basis) to $252 million, reflecting higher television programming costs, a thinner slate of movies and a slowdown in the theme park business.

Universal, however, expects a strong second quarter with such box office hits as "Bruce Almighty" and "2 Fast 2 Furious."

Hit even harder was Universal Music Group, which reported an operating loss of $33.2 million in the first quarter, contrasted with a profit of $32 million a year ago.

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