MGM's Not Out Yet, But Needs to Bid More


MGM's attempt to force Vivendi Universal S.A.'s hand in the auction for the French conglomerate's U.S. entertainment assets backfired last week, with sources confirming reports that Vivendi had rejected the studio's bid.

That doesn't mean Metro-Goldwyn-Mayer Inc. is out of the bidding altogether, if it's willing to up its price.

"I wouldn't count them out," one source close to Vivendi said. "What Vivendi said was that it was not a sufficient bid based on the criteria that had been put forth by the board of directors. It didn't meet the guidelines. Which means, too low."

MGM bid $11.5 billion for the assets — collectively called Vivendi Universal Entertainment — or about $300 million more than it bid in the first round, the source familiar with Vivendi said.

Sources familiar with Vivendi said MGM chairman Alex Yemenidjian wrote to Vivendi Universal COO Jean-Bernard Levy, saying MGM would bid more only if Vivendi would provide the studio with more detailed information.

MGM wanted the data, including more detailed information regarding carriage agreements for VUE's cable networks, by July 21 or it would drop out of the bidding.

A spokesman from MGM did not return a phone call for comment. Vivendi declined to comment.

Vivendi is said to have replied that it would consider releasing some financial information on VUE, possibly by July 21.

Just what that might include wasn't clear. Vivendi was concerned some of the data included highly-sensitive competitive information about the film business.

Vivendi placed VUE on the block early this year, to trim debt.

Initial bids on the assets — which include cable channels USA Network, Sci Fi Channel, Trio and NewsWorld International and the Universal film studio — were due June 23.

One bidder got tossed out on July 1. Oil billionaire Marvin Davis's offer was rejected as too low.

Of the remaining bidders — Liberty Media Corp., Viacom Inc., General Electric Co.'s NBC television unit and a group headed by former Vivendi vice chairman Edgar Bronfman — MGM was thought to be a frontrunner.

Published reports had put the initial MGM bid at $11.2 billion.

Two other bidders still thought to have an inside track — Liberty Media and GE — reportedly offered less cash than MGM.

Viacom, which is interested only in the cable networks, was reportedly in talks with InterActiveCorp chairman Barry Diller about teaming up on a bid.

But Diller, who owns a substantial amount of Vivendi stock, agreed to a standstill agreement when he sold his USA Networks Inc. assets to Vivendi in 2001. That bars him from bidding on VUE.

A source close to Vivendi said Diller has not asked to be let out of that standstill agreement.

People familiar with Vivendi say the company is intent on maintaining a leisurely pace to the auction, which has no set deadline.

Most expect Vivendi to make a sale decision by Sept. 30.