Vivendi Extends Auction Agony With Talks


Investors hoping for a conclusion to the four-month auction of Vivendi Universal S.A.'s U.S. entertainment assets were disappointed last Tuesday, after the French conglomerate said it would continue to negotiate with General Electric Co. and a group headed by former Vivendi vice chairman Edgar Bronfman Jr.

According to reports, Vivendi chairman Jean-Rene Fourtou may have delayed picking a winner because Vivendi wanted to extract more money from the bidders.

Observers have said that strategy could backfire and Bronfman, in an interview with the Financial Times
last Wednesday, said that a GE deal would be "exactly the wrong move" for shareholders.

Bronfman is still a substantial shareholder in Vivendi — according to documents filed with the Securities and Exchange Commission in June, the Bronfman family controls about 5.14% of outstanding shares.

"The NBC deal is not VU selling entertainment, it's VU buying an interest in NBC," Bronfman told the Financial Times. "They're turning over the keys to the car, hoping someone else will drive it faster and that someone else will pay more for the car 10 miles down the road."

Vivendi officially put its Vivendi Universal Entertainment assets on the block in April. At least six potential bidders emerged for VUE, comprising USA Network, Sci Fi Channel, Trio and NewsWorld International, the Universal movie studio and Universal Studios theme parks.

But that field quickly dwindled. First to drop out: oil billionaire Marvin Davis, whose bid was deemed to low. In July, Metro-Goldwyn Mayer Inc. took itself out of the running, claiming Vivendi's asking price was too high.

Vivendi had set the bid price at $14 billion, sources said.

Earlier this month Comcast Corp. said it would not bid on VUE but would work with Vivendi to develop new channels.

And last Monday night, Liberty Media Corp. pulled the plug, stating that "the synergy opportunities with our other businesses are not sufficient to support the expected transaction value."

Viacom Inc., said to be interested in VUE's cable channels, never submitted a bid.

GE has been viewed as the front-runner for VUE, and would create a separate entity that combines NBC, cable channels CNBC, Telemundo, MSNBC and Bravo with the VUE assets. While the GE bid included no upfront cash, Vivendi would receive a minority interest in the joint venture that it could cash out over time.

Bronfman's bid reportedly included the most upfront cash — $8 billion — and was worth about $13 billion in total, according to reports. Bronfman's group includes private equity investors the Blackstone Group and Thomas H. Lee Partners, and Cablevision Systems Corp., which was expected to contribute its Rainbow Media Holdings Inc. national programming assets to the bid, not cash.