[peter noble]

Vivendi targets summer exit from entertainment biz

Tue May 20, 2003 01:32 PM ET
By William Emmanuel

PARIS, May 20 (Reuters) - Vivendi Universal is in talks with four or five groups on the sale of its U.S. entertainment business and a deal could be signed as early as this summer, sources close to the matter said on Tuesday.

The enterprise value of the business -- stretching from Universal Studios to cable TV channels and theme parks -- is estimated around 15 billion euros, or just enough to wipe out the post-expansion debts of parent Vivendi Universal EAUG.PA .

Vivendi confirmed last month it was selling the U.S. entertainment assets acquired from Seagram in 2000 and quitting Hollywood to haul itself out of debt. It is keeping telecoms and leaning towards keeping its U.S.-based Universal Music business.

"The sale represents such a weight of capital that the new Vivendi Universal would be an 18 billion euro group with positive operating earnings and no debt. The group would immediately win back investment grade status on the markets," a person involved in the talks said, asking not to be named.

"There is a buzz going round on VUE because people are realising these are best communication assets currently up for sale. Four or five people are interested. If everything goes to plan a deal could be signed by the summer or in September."

Vivendi also hopes to sell its computer games around the same time as entertainment, sources added.

Liberty Media L.N , Viacom VIAb.N and General Electric's GE.N NBC television network are all said to be interested in at least part of Vivendi Universal Entertainment, the U.S. subsidiary grouping the showbiz and theme park assets on sale.

They join Texan oil billionnaire Marvin Davis, who last year bid $20 billion for VUE plus Universal Music, including assumed debt, in chasing all or part of the fallen Vivendi empire.

Liberty wants the whole slate of assets on sale to reduce the holding company discount on its stock, while Viacom is interested in combining Universal Studios with its Paramount Studios -- though that may raise regulatory issues.

NBC is interested solely in the cable TV assets that previously belonged to USA Networks, sources said. Investment fund Blackstone is meanwhile after the theme parks.

Vivendi declined comment.

Reflecting the possible list of bidders, Vivendi has hired Goldman Sachs as a second bank involved in selling the assets alongside Citigroup, it emerged on Monday.

Complicating the sale process are tax liabilities inherited from the original deal that merged the entertainment assets of Barry Diller's USA Interactive with Vivendi's U.S. arm in late 2001.

Vivendi has not ruled out selling the whole parcel of assets and buying part of it back to try to avoid any fiscal consequences, a move U.S. tax authorities might block.

Despite apparent optimism in the Vivendi camp, financial analysts have so far been fairly prudent about the sale of VUE, saying the complexities surrounding it give little visibility.

"It's a relatively complicated dossier. Vivendi Universal will perhaps be tempted to pre-announce deals. There could be some time before cash comes into the bank," a sector specialist at a Parisian brokerage said.