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Vivendi is mum on its NBC Universal plans

October 15, 2009|Meg James

Vivendi is being un peu mysterieuse.

The board of the French media and telecommunications company met in Paris on Wednesday, but the company refused to say whether it had voted to shed its 20% stake in NBC Universal -- or whether the subject was even discussed.

Vivendi has time to decide. On Nov. 15, a three-week window opens for Vivendi to notify its partner, General Electric Co., whether it will exercise an option to sell its interest in NBC Universal. That window reopens each year.

GE has spent the last four months preparing for Vivendi's possible exit. The industrial giant has been negotiating to sell its controlling interest in NBC Universal to cable television giant Comcast Corp.

Under terms of the deal, GE would sell Comcast 51% of NBC Universal -- which owns the NBC broadcast network, Universal Pictures movie studio, theme parks, Spanish-language network Telemundo and such profitable channels as USA, Bravo, MSNBC and CNBC. GE would retain the remaining 49%.

But there could be a French fly in the ointment. Vivendi must affirm that it wants out before GE's deal with Comcast can move forward. In its contract with GE, Vivendi also has veto power over any change in control at NBC Universal.

And for now, there is little reason for Vivendi to divulge its plans.

"They should keep quiet. You do not want to reveal your hand to the other parties until you have to, and we are still a month away from the opening of the liquidity window," said Claudio Aspesi, a media analyst with Sanford C. Bernstein & Co. in London.

Vivendi no longer has a pressing need for billions of dollars in cash. Its planned acquisition of a Brazilian telecommunications firm appears to be faltering after a Spanish company last week submitted a higher bid.

Without an acquisition on the horizon, Vivendi could decide to hold on to its stake for another year.

By waiting, Vivendi increases leverage with GE. The French company is not satisfied with valuations being negotiated for NBC Universal, according to people familiar with the situation. Analysts estimate that NBC Universal is worth $23 billion to $35 billion. At $30 billion, Vivendi could receive as much as $6 billion for its stake.

On the other hand, if Vivendi waits to sell it could see a further decline in NBC Universal's business, thereby devaluing its stake.

Complicating the situation, GE appears to be negotiating only with Comcast. That could be of concern to Vivendi because it wants to extract the best possible price for its stake, and single-bidder auctions typically don't yield the highest price.

Wall Street has been watching for other potential buyers to emerge, which could help drive up bids. But one of the most frequently mentioned buyers, Time Warner Inc., has made it clear that it is not interested.

Others are watching to see whether News Corp.'s Rupert Murdoch will enter the fray. Regulatory hurdles, however, would make the deal difficult for Murdoch.

Some believe that Colorado-based cable pioneer John Malone of Liberty Media could step in and pick off some of the NBC assets. But according to one executive familiar with the situation, Malone was told that GE was negotiating solely with Comcast and not entertaining other offers.


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