The sale of Vivendi Universal Entertainment, the company which ownsUniversal Studios, has become so confusing that the world's major businesspapers cannot agree who is left in the auction - even after this week's finaldeadline. The New York Times reportstwo companies still standing, TheFinancial Times says three on one page, four in its influential Lex column. And VUE's corporateparent, Paris-based Vivendi Universal is not saying anything.
What is even less clear is whetherthis whole mess is the result of a misunderstanding brought about by a clash ofbusiness cultures - Vivendi's Colbertistchairman Fourtou vs thewiliest old foxes of the US free-market media scene - or whether the delayingtactics are a deliberate ploy by the French firm and its bankers to force ahigher price out of the moguls.
While either is still possible, itseems unlikely that Vivendi Universal is going toachieve all three of its disposal targets; namely raising $14bn from the saleof VUE, cutting its own debt to $11bn by the end of the year and getting out of
Edgar Bronfman Jr(in tandem with partner, Cablevision) and Liberty Media appear to have madeformal bids by the deadline. And it seems that General Electric/NBC, may believe itself so involved in ongoing talks with Vivendi Universal, that it did not file a full offer.Depending which newspaper you read, Viacom (parent of
Valuing VUE, where the bidders andauctioneers clearly do not seem to see eye to eye, is an issue clouded by Vivendi Universal's position as a forced seller and by thebidders' instinct that if they are tough enough they could be making the dealof the century.
Although he appears to be toughingit out, and was right to do so with the disposal of mobile phone operator SFR, Vivendi Universal's Fourtou, whohas made little secret of his dislike of doing business with America's economicliberals, is probably going to have to make some kind of compromise. Either on price or on the cleanliness of his exit from the
He has already waved goodbye to MGM's$11.5bn all cash offer and can argue that media sector valuations are rising inthe
The alternative is a partialflotation of the group. If stockmarkets hold firm orrise that might deliver it the greatest valuation, but would leave Vivendi Universal still consolidating VUE'searnings and its $4.4bn of debts.
If Fourtoucan persuade them to put some cash on the table (it is reported that he wants$3.5bn) a deal with GE/NBC may be the best solution. It would still involveholding a minority stake in the business and keep VivendiUniversal in the US, but it would leave someone else with the headache ofrunning it and allow VUE's debts to be removed fromits balance sheet.
Cynics and psychologists might addthat another factor mediates in favour of a deal with GE: Fourtouand GE appear to understand each other. Both VivendiUniversal and GE are big old utilities-based conglomerates that got jinky by diversifying into media. By teaming together theycould create a properly integrated communications pole (Universal-NBC-cable channels) outof media assets they have both wondered what to do with. That way they may be able toput fire-sales behind them and eventually, one day, sell out of a success story.