Vivendi Universal today (Sept 8) announced it had signed a definitive agreement with General Electric to merge its US entertainment interests (VUE) with GE's NBC.
As expected, the new company will be called NBC Universal and will be 80% owned by GE with 20% held by the shareholders of VUE.
In a joint statement, the companies noted that NBC Universal will create "one of the world's most profitable and fastest-growing media companies, with an estimated value of $43 billion."
No official value was put on the deal, although the Wall Street Journal put the value at $14bn.
Current GE vice-chairman and NBC CEO Bob Wright will head up the new company. Regulatory approval is still to come with both companies expecting resolution in the first half of 2004.
NBC Universal's assets will now include the NBC television network, Universal Pictures, TV production studios NBC Studios and Universal Television - whose combined libraries hold over 32,000 TV episodes - cable networks USA, the Sci-Fi Channel, CNBC, MSNBC, Bravo, Trio and Spanish-language broadcaster Telemundo along with the Universal theme parks.
Under the terms of the deal, debt laden Vivendi Universal will receive $3.3bn in cash for contributing VUE to the merged company. GE will also assume $1.7 billion of debt from Vivendi Universal.
In 2006, Vivendi Universal will have the option to sell off its shares in NBC Universal. Should Vivendi not sell its shares, GE will have a call option to buy them out in 2009.
Vivendi will also hold three out of 15 seats on the board of directors of NBC Universal.
The new company is expected to have revenues for 2003 of over $13 billion.
Vivendi Universal chairman Jean-Rene Fourtou said of the merger: "This is a very good agreement for Vivendi Universal's shareholders, both in terms of value creation and the reduction of our debt.
"This transaction will significantly lower Vivendi Universal's debt. This agreement will consolidate our media and telecommunications company. By the end of next year, Vivendi Universal will be a profitable company with a low level of debt, and our teams will be motivated by the new prospects for growth."
Reducing the staggering debt accumulated by Vivendi during the tenure of former chairman Jean-Marie Messier has been the major focus for Fourtou since he took over in July 2002. At the beginning of September, Vivendi's debt was reported at Euros 13bn.
Jeff Immelt, Chairman and CEO of GE, said: "With this merger, NBC will stay in the forefront of the fundamental changes taking place in television and other media. "The new NBC Universal will have the assets, the management team and the operating focus to prosper in a digital world and enhance value for GE and Vivendi Universal shareowners. This deal demonstrates GE's commitment to be a global leader in technology and customer focus."
In a conference call with journalists Wednesday morning Fourtou said "VUE was a risk for us," and needed the support of a stronger company behind it Fourtou also noted that negotiations were underway to dispose of the $2 billion interest Vivendi still holds in Barry Diller's IAC/Interactive Corp.
Fourtou also insisted on Vivendi Universal's commitment to continuing to develop Universal Music, Canal Plus and StudioCanal.