Vivendi Universal has eliminated an offer by oil billionaire Marvin Davis for
its Vivendi Universal Entertainment unit and has instructed the five remaining
bidders to come back with a deal solely for the U.S. entertainment assets.
Vivendi issued a statement after the regularly scheduled meeting of its board
of directors in Paris Tuesday, stating that the bidding "process is moving at a
sustained pace and a very significant competition has arisen," and adding,
"In-depth negotiations will now be pursued with selected bidders."
A source close to Vivendi confirmed that the Davis bid was eliminated. Other
bids by Liberty Media Corp., Viacom Inc., General Electric Co.’s NBC television
unit, Metro-Goldwyn-Mayer Inc. and a group headed by former Vivendi vice
chairman Edgar Bronfman Jr. are still being considered.
The five remaining bidders are being asked to come back within 10 days to two
weeks with offers just for VUE -- consisting of cable channels USA Network, Sci
Fi Channel, Trio and NewsWorld International, as well as Universal Studios and
theme parks. Previous bids by Liberty and Bronfman also included offers for
Vivendi’s Universal Music Group, which, sources said, is not on the table.
"Universal Music never really was on the table," said one source close to
Vivendi. "The bidders are the ones that put it on the table."
Vivendi chairman Jean-Rene Fourtou said in April that while the company
intended to sell VUE, the music group was not for sale because Vivendi believed
that in light of the depressed music market, it would not attract a high
Liberty initially made a separate offer for UMG in the hopes that it would
give the Denver-based media giant an advantage in negotiations for VUE.
Davis was the first bidder for VUE, essentially putting the unit in play with
his unsolicited offer of $20 billion (including $5 billion in assumed debt) in
November. Davis’ bid also included UMG.
There had been some questions as to whether Davis would be able to come up
with the money. His bid relied heavily on financing from two private-equity
firms -- Bain Capital and Texas Capital Partners -- that are traditionally
skittish about paying high prices for assets.
According to one source, Davis’ relative inexperience in the media business
-- he owned the 20th Century Fox film studio for three years in the
early 1980s -- compared with the other bidders played a role in his
"Everybody else has experience in media, [Davis] doesn’t," said the source
close to Vivendi. "Vivendi is looking at this as a value proposition rather than
a price proposition."
One wildcard in the bidding is Viacom, which expressed interest in VUE’s
cable channels and television-production studio last week.
Sources said Viacom’s chances could be increased if it partnered with one of
the other bidders, or possibly InterActiveCorp (formerly USA Interactive) chief
Barry Diller, for the studio and theme park assets.
VUE was formed in 2001 after Diller sold the remaining interest in his USA
Networks Inc. cable properties that Vivendi didn’t already own for $11
Lately, however, Diller and Vivendi have been at odds after then-USAi sued
Vivendi, claiming that it was owed more than $620 million in tax payments.
"If Diller negotiates properly and there are negotiations regarding his
demands from the sale of the USA Networks properties, it’s always a
possibility," the source close to Vivendi said.