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Despite Rebuffs, Marvin Davis Fixes Gaze on Vivendi's Assets

Sources say the oil tycoon is digging in his heels in his bid for a controlling interest in the company's Hollywood properties.

May 05, 2003|Richard Verrier | Times Staff Writer

Either Vivendi Universal is playing hard to get, or the company simply doesn't want to be wooed by Los Angeles billionaire Marvin Davis.

So far, Vivendi has twice rebuffed Davis' proposal to pay $13 billion for a controlling interest in all of its Hollywood assets -- the movie studio, theme parks, games, music and television assets -- as too low. The Paris-based conglomerate has signaled a willingness to sell its entertainment assets one by one and has openly courted other suitors. Vivendi Chief Executive Jean-Rene Fourtou has even poked fun at Davis' eagerness to return to Hollywood.

But Davis, the one-time owner of 20th Century Fox who has a reputation for walking away from deals in the face of complications, is digging in his heels this time, say sources close to the oil magnate.

"He's waited this long, I don't think he's going to back off now," one source said.

A spokesman for Davis declined to comment.

Davis has been left in the unaccustomed position these days of not being the man in control. Vivendi, as it tries to dig its way out of a debt hole of $18 billion, seems to be exploring simply how to make the most money off its ailing empire -- whether it is by selling pieces or unloading the whole operation to single buyer.

Analysts' estimates have placed the value of the overall entertainment operation at between $18 billion and $25 billion. Davis' investment group values the overall entertainment operation at just under $20 billion. He has offered to buy about a 65% stake in it.

Although the events of recent weeks -- including a possible deal to sell the theme parks to an individual bidder -- does not look good on the surface for Davis, he believes that when the dollars have settled, Vivendi will be chasing him.

In March, Davis attempted to back Vivendi into a corner, demanding that the company negotiate exclusively with his investment group, which includes investment firms Carlyle Group, Bain Capital and Texas Pacific. When Vivendi refused, Davis did not make good on his threat.

Also undercutting the Davis camp is Vivendi's apparent desire to either hold on to the music group or sell it separately. Apple Computer Inc. has been in talks to buy all or part of the group. Neither Apple nor Vivendi have commented on the talks.

The issue that caused the latest potential roadblock for the Davis group emerged last week with reports that Vivendi has been in talks to sell all or part of its theme park division to the Blackstone Group, a prominent New York investment firm, for about $1.5 billion.

Such a strategy would undercut Davis' investment group, which has made its offer contingent on buying all of the assets in the Universal family. The Davis alliance, however, is said to believe that Vivendi will keep its theme parks with television and movie studio holdings and that a sale to Blackstone is unlikely.

That's because breaking up the partnership through the sale of individual assets would trigger costly tax payments of nearly $1 billion, and would require the consent of former Vivendi executive Barry Diller, who is an arch foe of Davis. Complicating matters is the fact that Diller's company, USA Interactive, holds a series of blocking rights on the disposal of the assets.

These tax complications led Fourtou to say last week that the company would prefer to find a single buyer for Vivendi Universal Entertainment.

Sources said Sunday that Vivendi is considering a sale-and-buyback strategy to avoid these breakup liabilities. Under one scenario, a bidder with interest in one of the assets would agree to acquire them all, and then sell most of them back to Vivendi. Then, Vivendi would be able to sell off the remaining assets piece by piece to the highest bidders.

A handful of the media entities that have expressed interest in some of Vivendi's television and cable assets, including General Electric Co., Viacom Inc. and Liberty Media Corp. have the financing available to undertake such a deal.

Despite their long history at Universal, the theme parks are viewed by many to be more of a secondary asset rather than a crucial piece of the Universal empire, such as Universal Music Group. The parks generate about $100 million in cash a year, compared with $900 million for the music group.

Because the theme parks aren't crucial to the studio's operation, some analysts say selling them separately could make the remaining Universal holdings more attractive to bidders.

Blackstone and Vivendi have declined to comment.

Even if the parks were sold separately, Davis probably would modify but not scrap his bid for Universal altogether, analysts said.

Davis' doggedness six months after he made his initial offer has surprised many industry observers.

Vivendi sources said Fourtou hasn't ruled out the tycoon's bid, but has been buying time until the economy improves.

Fourtou's "timing is good," said New York money manager Mario Gabelli. "He's going to get on top of Mt. Hollywood and say to the left is France to the right are my Hollywood assets."



What it's worth

Vivendi Universal is looking at selling off its U.S. entertainment assets as it tries to whittle down its $18- billion debt load. A look at assets that could be on the auction block, and their estimated value:


Movies: $4.7 billion

Universal Pictures: '8 Mile,'

'The Hulk,' 'Seabiscuit'


Theme Parks:

$1.5 billion-$2 billion

Parks worldwide, including Universal Studios Hollywood and Universal Orlando


Television & Cable: $5 billion

'Law & Order,' USA Network, Sci-Fi Channel


Music: $7 billion

Labels: Decca, Interscope, Geffen, A&M, MCA, Motown, Polydor, Universal

Artists: Mary J. Blige, Eminem, Elton John, Limp Bizkit, No Doubt, Luciano Pavarotti, Sting, U2


Games: $1.5 billion



Sources: Sanford Bernstein, J.P. Morgan

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