Copyright 2003 Gannett Company, Inc.
August 26, 2003, Tuesday, FIRST EDITION
New York — Cable pioneer John Malone and Liberty Media on Monday dropped out of the auction for Vivendi Universal's show business empire.
Unwilling to meet Vivendi's demand of $14 billion, Liberty walked on the eve of a pivotal Vivendi Universal board meeting in Paris today. The board could determine the future of Vivendi Universal Entertainment (VUE), which includes Universal's film and TV studios, theme parks and the USA and Sci-Fi cable channels. Liberty's exit leaves NBC, a unit of General Electric, and an investor group led by billionaire Edgar Bronfman Jr. as the last bidders standing.
"The synergy opportunities with our other businesses are not sufficient to support the expected transaction value," explained Robert Bennett, CEO of Liberty, which holds a 3.5 percent stake in Vivendi. MGM previously dropped out of the auction, and Comcast declined to bid due to the price.
Viacom has offered to buy only the cable networks, but the board is expected to focus on the NBC and Bronfman bids. Chairman Jean-Ren Fourtou might propose to enter exclusive talks with one bidder.
Bronfman and NBC have been turning up the heat to gain an edge. On Monday, Bronfman's group, including Cablevision, increased its offer to more than $13 billion, said one source. Bronfman is also front-loading his offer with up to $8 billion in cash, an attractive inducement to Vivendi, which is struggling to climb out from under a $13 billion debt load.
Favorite NBC delivered a letter on Saturday that outlined in detail its offer to merge the peacock network with VUE. Vivendi initially would hold a 25 percent stake in the proposed venture that it could cash out when it goes public. To counter the cash Bronfman is dangling, NBC Chief Executive Bob Wright's latest proposal includes a commitment by NBC to buy the stake, said sources familiar with the talks. Vivendi could borrow against that to get cash quickly.
Meanwhile, former USA owner Barry Diller is a wild card for any deal. Diller's IAC/InterActiveCorp holds 5.5 percent of Vivendi; Diller holds 1.5 percent. An IAC spokesperson says that under terms of the USA deal, Vivendi would owe IAC $2.4 billion for the holdings if sold.