Paramount-owner, Viacom may have emerged as the new front-runner in the race to buy Vivendi Universal's US entertainment assets. Viacom is understood to have focused its interest on Universal Studios and the TV operations, but not Universal Music.

Viacom chief Sumner Redstone and Vivendi Universal boss Jean-Rene Fourtou met recently in secret to discuss the options. Fourtou is already holding a bid worth $20bn - including the music business - from Texan oil billionaire Marvin Davis.

Vivendi Universal is scheduled to hold a full board meeting on Thursday and later this week to formally start the process of seeking bids. It is not currently clear whether Vivendi Universal would be able to realise an acceptable price for the music business as the music industry is in decline and recent attempts by other groups to strike merger and takeover deals have been blocked by US and European monopoly regulators.

Monopolies concerns could be an issue for any Viacom bid. Were it to buy Universal it would own two fully-fledged studios, which is unprecedented in the modern era.

But with six other studios and two mega indies New Line and Miramax also in the US market, Viacom could make out a good case that there is enough competition that an enlarged group would not infringe anti-trust laws.

Paramount and Universal are already partnered in foreign releasing operation United International Pictures (UIP) and are equal owners of overseas exhibition chain United Cinemas International (UCI). Following the collapse of AOL Time-Warner's share price last year, Viacom has become the world's largest media concern in terms of market capitalisation and is the healthiest in terms of balance sheet.

News wire sources, however, suggest that after their meeting Redstone may have lost interest in the studio and concentrate now on buying the TV assets. These include USA network, the Sci-Fi cable channel, international channels and TV production operations.

Other complications for Fourtou, who is sitting on a debt mountain of some Euros 17bn, include reports that Davis is getting impatient and has sought exclusive negotiating rights with Vivendi Universal. Another is the presence - and minority shareholding - of Barry Diller's USA Interactive. He has blocking rights over any restructuring of Vivendi Universal Entertainment, the holding company for the US media assets.