Vivendi’s dream sale fades

VIVENDI Universal’s dream of landing a $14 billion cash-rich deal for its US entertainment empire is fast evaporating with final bids likely to fall short of the mark, sources involved in the auction said.

As the deadline for bids looms today, the media giant is facing a dwindling field of contenders for its Universal film, television and theme park business, with most valuing the assets at least $1 billion below Vivendi’s price tag, the sources said.

Vivendi chief Jean-Rene Fourtou, who took over from Jean-Marie Messier last year as the group teetered on the edge of collapse, is sticking by his $14 billion demand, despite the exit of another contender Thursday, Comcast.

“I don’t think anyone is going to get to that number [$14 billion],” said a source involved in the auction.

The French chief executive is now facing three options: accept a bid below its price tag; pursue a joint venture with no up-front cash with General Electric’s NBC or Comcast; or go it alone down the flotation route, sources said.

For now, NBC is considered the leading contender. The US television network is proposing to combine its channels, including MSNBC and Bravo, with Vivendi’s business in a venture controlled by NBC. That option would give Vivendi a minority stake and may be its best hope of getting near its price target.

Among other remaining contenders, a team led by Vivendi vice chairman Edgar Bronfman Jr has been holding high-level talks this week and is expected to present a second-round bid, a source familiar with Bronfman’s activities said.

Viacom, which owns Paramount Pictures, has also been continuing talks but is still only interested in the cable TV business and has already expressed qualms about Vivendi’s price demands, one source familiar with the auction said.

“I continue to believe that Vivendi will pursue one of two options: either a joint venture with NBC or delay a disposal this year and pursue an IPO next year,” said Mark Harrington, a media analyst at Bear Stearns in London.

The big unknown is cable operator Liberty Media. Originally seen as the favoured contender, Liberty subsequently backed off the auction in light of Vivendi’s price demands, sources said.

The cable operator remains in the auction but sources familiar with the process have expressed scepticism that it will make a second-round bid by the deadline on Monday.

If the auction does not work out, Vivendi has said it will hold onto Vivendi Universal Entertainment and sell a 25-30% stake on the stock market at a later date.