A little more than one month after first announcing its intentions, General Electric Co.’s NBC television unit finalized its $14 billion acquisition of Vivendi Universal Entertainment, creating a $43 billion broadcasting- and cable-television powerhouse called NBC Universal.
The deal did not deviate much from the original proposal announced Sept. 2.
Shareholders of VUE parent Vivendi Universal will receive $3.8 billion in cash, $3.3 billion of which goes to Vivendi for its 86% stake in VUE. In addition, NBC Universal will assume about $1.7 billion in Vivendi debt, slightly more than the $1.6 billion it said it would take on in September. The remaining valuation -- about $8.5 billion -- is attributable to Vivendi’s 20% stake in NBC Universal.
The new NBC Universal will combine GE’s NBC broadcast network; its cable channels, Bravo, MSNBC and CNBC; and its Spanish-language broadcaster, Telemundo, with VUE’s USA Network, Sci Fi Channel and Trio cable networks.
In addition, the new entity will house VUE’s Universal Studios movie studio, its Universal television-production unit and its Universal theme parks.
NBC said it sees between $400 million-$500 million in synergies after the deal closes -- about $350 million in cost savings and $100 million in additional revenue.
On a conference call with analysts, NBC chairman Bob Wright -- who will also be chairman of NBC Universal -- praised the deal and especially the cable channels.
Wright called the VUE cable channels complementary to NBC’s current cable offerings, adding that in the future, video-on-demand offerings using USA programs like The Dead Zone
could be a major profit center for the combined entity.
But Wright also hinted that NBC could use its considerable broadcast muscle to gain long-term deals with cable operators.
"We have a good relationship with the cable industry," Wright said. "We have long-term agreements, we have some short-term agreements that they have. We will work hard to turn them into long-term agreements as we get past the closing. And we have plenty of opportunities to offer VOD and other programming enhancements to cable operators as they try to make their way in the digital world."
The deal is expected to close in the first half of 2004.
The agreement marks the end of nearly one year of tough negotiations with a handful of potential suitors, some of which publicly stated that Vivendi’s asking price for the VUE assets -- $14 billion -- was unrealistic.
In a conference call with analysts Wednesday, Vivendi chief operating officer Jean-Bernard Levy appeared to gloat just a bit over the deal that was finally made.
"We have reached our objective of $14 billion of value for VUE, which is the objective we stated to all of those people that were trying to get the assets back in June and July and early August and getting to all the press and saying, ‘These French people don’t know the value of what they’re selling; they are crazy about this value, they are emphasizing a value of $14 [billion], they will never reach it,’" Levy said on the conference call.
"We have reached it and we have confirmed it, because after due diligence, there is no change in the value of the business," he added.
Vivendi got essentially what it has been asking for all along: cash to pay down debt and an interest in a combined entity that could be worth much more down the road.
According to the agreement, Vivendi will have the option of cashing out of the partnership in 2006 for about $3 billion, or $4 billion in 2007. In addition, it could participate in an initial public offering of its NBC Universal stake.
GE has call rights for Vivendi’s interest in the partnership beginning in 2009, at fair market value of the combined entity or the current value of the deal.