Auction Time For VUE Nets


Vivendi Universal S.A. chairman Jean-Rene Fourtou officially opened the door to a bidding war for the company's U.S. entertainment assets, telling shareholders at its annual meeting in Paris last Tuesday that he hoped to sell the mix of cable channels, a movie studio, music and theme parks by the end of the year.

Vivendi's U.S. holdings — collectively called Vivendi Universal Entertainment — have been unofficially on the block since November, when Texas oil billionaire Marvin Davis made a $20 billion bid for them.

Since then, other potential suitors have nosed around VUE, including Viacom Inc., General Electric Co.'s NBC unit, Metro-Goldwyn-Mayer Inc. and Liberty Media Corp. Liberty was expected to make a joint bid with former VUE co-CEO Barry Diller.

Viacom, which announced earlier this month its deal to purchase the remaining half of Comedy Central it didn't already own for $1.23 billion, is actively pursuing other cable networks. In the past Viacom president and COO Mel Karmazin expressed a desire to own Sci Fi.


Liberty, which would likely pair up with Diller, could spin off its Starz Encore Group LLC premium-channel unit into a separate entity and combine it with VUE.

MGM, which is a minority partner with Cablevision Systems Corp. in several Rainbow Media Holdings cable channels, has been craving a network of its own for years.

Although VUE has been in play for months, many potential bidders have held off, mainly because Vivendi had wanted to sell the assets as a single package.

Most interested parties have focused on VUE's cable channels: USA Network, Sci Fi Channel, Trio and Newsworld International. Also included in VUE are the Universal movie studio, Universal Music Group and Universal theme parks.

But at the annual shareholders meeting last week, Fourtou said that Vivendi would sell VUE in whole or in part, indicating that perhaps there weren't many takers for the whole of the U.S. group.

Though he didn't identify any potential bidders, Fourtou said Vivendi is in discussions with several interested parties to dispose of VUE in whole or in part, either for cash or cash plus an interest in a larger entity.

"Since early March we have become convinced that there is really no point in thinking that we can develop VUE and grow the business knowing it's in Los Angeles and we are here," Fourtou told shareholders. "It has a number of interesting and good TV channels. The TV activities would need to be considerably developed to make any sense. Do you think that we can become a lead player in U.S. television? No. That would be deluding ourselves."

So far, Davis has been the only bidder for the whole package, and Vivendi at first dismissed his bid as too low.

But one component of VUE that likely will not change hands this year is the music group, Fourtou added.

"Selling music today would be tantamount to relinquishing a fabulous position for not enough money," Fourtou said. "But keeping it can be viewed as a risk. We have the feeling that UMG can probably stand to be kept for quite some time."

Rein for JM

Fourtou also addressed the ongoing controversy with Vivendi's former chairman, Jean-Marie Messier and his $20 million severance package. "We have decided to pay him nothing," Fourtou said.

Messier's employment agreement is a bit complicated because it involves both American and French contracts. Fourtou said that Messier was not paid according to his French contract because he resigned. Regarding his American contract, Vivendi also said it would not pay the former chairman.

"I clearly refuse to pay him anything on his American contract," Fourtou said. "He sued, and we are in the process of referring the matter to an arbitration tribunal."

Fourtou contends Messier owes Vivendi about $93,000 for back rent. Messier, who lived in a $17.5 million company-owned Manhattan duplex while he was chairman, reached a deal to stay in the tony digs until Dec. 31, 2002, provided he pay $31,000 per month rent. He stayed in the apartment until the end of March and paid no rent.

"We will do everything we can to recover the money due to us," Fourtou said.