GE's NBC And Vivendi Get Serious

Vivendi Universal and General Electric Co. agreed Tuesday to enter exclusive negotiations to merge Vivendi's U.S. entertainment assets and GE's NBC division, the French media and utilities conglomerate said.

Vivendi said the new company, if formed, would be 80 percent owned by GE and 20 percent by Vivendi. It would have revenues of $13 billion in 2003, Vivendi said in a statement.

Vivendi said the firm, expected to be called NBC Universal, would be headed by Bob Wright, vice chairman of GE.

Once the deal is closed, the shareholders of Vivendi Universal would receive $3.8 billion in cash and stock, and $1.6 billion in debt reduction as part of the transaction, Vivendi's statement said.

The decision to go with GE followed months of negotiations and efforts by Vivendi to find a partner for its glamorous entertainment assets.

"I think we are in front of a very good deal," Vivendi board member Fernando Falco y Fernadez de Cordova said after emerging from a closed door meeting where the board weighed GE's bid against another from a group led by investor Edgar J. Bronfman Jr.

The deal would bring cash-starved Vivendi $3.8 billion up front and a 20 percent stake in the new venture, expected to be called NBC Universal.

The engagement between the two doesn't necessarily mean nuptials are a foregone conclusion, cautions CBS MarketWatch's Russ Britt, as the pact agreed upon Tuesday is nonbinding. There remains a possibility that Vivendi could decide to simply spin off the assets.

However, Vivendi has eyed GE's top-flight management team and the complementary assets of NBC all along as it sifted through a half-dozen bids for the properties.

The deal would align NBC with a major Hollywood studio; NBC has been the only major broadcast network that hasn't had this connection. That would provide it with a whole new stream of content from Vivendi's 4,000-title film library. In turn, Vivendi would have a key means of distributing its content.

Vivendi Universal Entertainment properties include the Universal film and TV studios, three cable TV networks and theme parks. It produced such recent movies as "The Hulk" and "Seabiscuit."

The Wall Street Journal said in Tuesday's editions that Vivendi was expected to sign a nonbinding letter of intent to negotiate exclusively with NBC on a deal for a limited period. If a deal cannot be reached, both sides could walk away, the story said.

Vivendi would get a stake in the combined media and entertainment business and could eventually sell it if it wanted to raise cash.

Bronfman, who once controlled the Universal properties as chief executive of Seagram Co., spent the weekend in a last-ditch lobbying effort to salvage his bid, a source familiar with the matter told the Associated Press.

Vivendi Universal shares rose 4.1 percent to close at euro16.60 ($18.06) per share in Paris trading Tuesday.

Vivendi has been hoping to fetch $14 billion for the Universal assets to pay down huge debts run up during a buyout spree under former chief executive Jean-Marie Messier.

After a board meeting in Paris last week, Vivendi said an eventual agreement with either NBC or the Bronfman group would leave the French company with a "substantial" stake in a U.S. media group. It also said it would explore a public offering for the entertainment assets.

Some of the biggest titans of the U.S. media world expressed in Vivendi's entertainment arm during the months-long bidding process, including cable TV mogul John Malone of Liberty Media Corp., CBS and MTV parent Viacom Inc. and Metro-Goldwyn-Mayer Inc.

Both MGM and Malone said they were dropping out of the bidding process because they felt the price was too high. Viacom had expressed interest only in the cable channels, and was effectively left out of the final round of bidding when Vivendi said it would continue talks only with NBC and Bronfman's group.

The Bronfman-led group includes Thomas H. Lee Partners, a private equity fund, and Cablevision Systems Corp., a cable TV company in New York that owns AMC, the Independent Film Channel and WE: Women's Entertainment channels.