Viacom Rejoins Vivendi Auction

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Viacom Rejoins Vivendi Auction

Multichannel News
6/27/2003 11:22:00 AM

Viacom Inc. had reportedly bailed out of the first round of bids in Vivendi Universal's auction for its Vivendi Universal Entertainment unit.

However, the company has told Vivendi executives it wants in on the second round of the auction.

Viacom plans to bid on VUE's cable assets, which include USA Network, Sci Fi Channel and Trio, Reuters reported.

Metro-Goldwyn-Mayer Inc., General Electric Co.'s NBC unit, Liberty Media Corp. and investment groups led by Edgar Bronfman Jr. and Marvin Davis are also eyeing VUE.

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No Knockout Bid as Vivendi Sifts Offers
Mon June 30, 2003 03:47 AM ET
By Merissa Marr

LONDON (Reuters) - Vivendi Universal's auction of its U.S. entertainment empire has attracted some of Hollywood's biggest names but none has made a knockout bid, leaving the field open as the French-American group prepares to decide who goes through to the next round.

After weeks of courting and coaxing bidders, Vivendi will put forward six contenders for its Universal film, TV and theme park business when its board meets on Tuesday, presenting a line-up that includes the family that formerly owned the assets and the owners of Hollywood's MGM and Paramount studios.

Cash and the ability to do a deal fast will be big swing factors in this auction -- putting bidders such as Liberty Media at an advantage. Vivendi Chief Executive Jean Rene Fourtou has pledged to slash debts this year and the sale of Vivendi Universal Entertainment (VUE) is set to be a big part of that.

But liquidity is not the problem it was a year ago when huge debts threatened to topple the world's second-biggest media group, giving Vivendi a degree of flexibility.

Vivendi will select from a list comprising: Liberty Media cable king John Malone; General Electric's broadcasting arm NBC; Metro-Goldwyn Mayer; Viacom; oil billionaire and former Twentieth Century Fox baron Marvin Davis; and Edgar Bronfman Jr, who is seeking to buy back the business.

The media group has told some bidders it will whittle the list down to two or three, sources familiar with the sale said.

But having toiled to persuade bidders such as Viacom and NBC to at least express an interest in the assets, the media group may be hoping the list will shrink naturally as bidders team up.

MISHMASH OF BIDS

Selecting from the six will be a hard task with contenders bidding for different assets and some drawing on multiple sources of financing to raise the more than $10 billion the entertainment business is expected to fetch.

Liberty Media -- which owns the Starz Entertainment cable network -- is seen as a strong contender. The cable group has the cash comfortably to back a bid and has offered to take the music business as well as VUE if necessary, sources say.

Davis and Bronfman are also bidding for both VUE and music.

Davis has former Seagram chief financial officer Brian Mulligan on board, and is certainly keen. He was the first to put up his hand for the assets last year, offering $15 billion excluding debt for VUE and the music business.

But like Bronfman, he does not have an existing business with which to merge the Universal assets.

Another issue hanging over Bronfman is whether he can raise the money for his bid. He has brought a group of private equity players on board but speculation over financing concerns remain.

Initially seen as an unlikely contender, Kirk Kerkorian's MGM has emerged as a more serious runner after raising the money for a fully financed all-cash offer of more than $11 billion.

Kerkorian is also willing to purchase Vivendi's Universal music business if it is added to the mix, sources said.

Viacom and NBC took some persuading to join first-round bidding. NBC put in a statement of interest after the deadline closed last Monday and Viacom followed suit a few days later.

NBC -- which owns MSNBC, CNBC and Bravo -- has since been discussing a strategic partnership that would combine the two companies' assets, giving NBC a controlling stake and leaving Vivendi with a minority share, one source said last week.

But while NBC, which broadcasts Vivendi's "Law and Order" drama, could take on some of Vivendi's debt, sources say, it is not expected to put up any cash.

By contrast, Viacom -- which owns the MTV network -- has made it quite clear it is only interested in the cable television assets and possibly Universal television, according to sources, implying it would need partners to take the other assets. (Additional reporting by Jeffrey Goldfarb and Reshma Kapadia in New York, Bob Tourtellotte in Los Angeles, Tim Hepher in Paris)

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MGM to Sell Cable Stakes to Cablevision

Mon June 30, 2003 08:49 AM ET
NEW YORK (Reuters) -
Metro-Goldwyn-Mayer Inc. MGM.N said on Monday it agreed to sell its minority stakes in a group of cable networks for $500 million to improve its financial position as it competes to buy the U.S. entertainment assets of Vivendi Universal V.N
MGM said it would sell its 20 percent stake in networks American Movie Classics, The Independent Film Channel and WE: Women's Entertainment to Cablevision Systems Corp.'s CVC.N Rainbow Media unit, which owns the remaining 80 percent of the networks.
The transaction could ultimately strengthen the position of both MGM and Cablevision as they compete for the Vivendi assets. MGM would get cash for its war chest to buy Vivendi. Cablevision, for its part, would own a 100 percent stake in three cable channels, which it would contribute to the bid by Vivendi Vice Chairman Edgar Bronfman Jr.
MGM said cable operator Cablevision would pay $250 million cash at closing, which is expected in the third quarter, and $250 million five months later. The Los Angeles-based film studio also said it would report a $93 million book loss in the second quarter, which ends on Monday.
Cablevision, based in Bethpage, New York, said in a separate statement that the second $250 million payment could be either cash or Class A common shares.
MGM said investors never appreciated the true value of the Los Angeles-based film studio owning the stations.
"We are turning an asset for which the financial community gave us little credit into over $2 per share in cash," MGM Chief Executive Alex Yemenidjian said in a statement.
After the second payment is made, MGM would have about $1.2 billion of cash on its books and $1.15 billion of debt.
MGM bought the minority stakes from Cablevision in 2001 for $825 million. It sold its 20 percent interest in arts channel Bravo, a fourth station that was part of the original deal, to NBC earlier this year for $250 million.
MGM also earned about $40 million in dividends for the stations while it owned them, meaning it is losing about $35 million on its two-year investment.
Cablevision has pledged the three stations to Bronfman. to help with his offer to buy Vivendi Universal Entertainment (VUE), the unit that houses Universal Studios, cable channels USA and Sci Fi and theme parks. Cablevision would get as much as a 33 percent stake in the company if Bronfman's bid were to succeed, sources familiar with the matter said.
MGM's bid values VUE at about $11 billion, sources familiar with it said. The structure would enable Vivendi to keep a 20 percent stake in VUE or to sell it as soon as the deal is completed. MGM and its backers are putting up about $9 billion in cash.
Of the three networks being sold, only AMC has established a solid audience. It shows a broad range of movies, from such classics as "Breakfast at Tiffany's" to mainstream comedies like "Smokey and the Bandit II."
Earlier this month, Cablevision fired 14 executives at AMC, including the president, because of accounting methods. Cablevision said an internal investigation revealed that $6.2 million in expenses, which should have been booked in 2003, instead were recorded in 2002.
The Independent Film Channel broadcasts mostly smaller, independently produced movies, such as "American Buffalo," the 1996 adaptation of a David Mamet play starring Dustin Hoffman. Women's Entertainment caters to female audiences with movies and original shows like "Full Frontal Fashion" and "Two Guys and a Girl."