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Old May 26th, 2003, 03:41 AM   #21
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Bronfman's hunt for Vivendi assets is 'all about image'

By_BRIAN MILNER
Monday, May 26, 2003 - Page B2

When asked if Edgar Bronfman Jr. is capable of mounting a serious bid to reacquire the entertainment assets of Vivendi Universal, the veteran Hollywood player couldn't help laughing.

"There isn't anybody who is a serious player who is going to give Edgar $15-billion [U.S.] and let him run that show," said the knowledgeable source, whom we'll call Deep Guffaw.

He also laughed at the prospect that Mr. Bronfman was somehow seeking redemption for the disastrous deal that put those very assets in Vivendi's hands in the first place and ultimately destroyed a considerable chunk of one of the world's great family fortunes.

"This is designed to make Edgar more viable in the set that he travels in," said Deep Guffaw, who travels in some of the same circles. "Announcing that you're a player with no backing doesn't get you anywhere on Wall Street. But it does make you a player again with the people you have lunch with at the [Four Seasons] Grill Room. For Edgar, it's all about image now."

Mr. Bronfman went public last week with the dramatic news that he was lining up financial and strategic partners to join the bidding for the Universal part of Vivendi.

This was the first clue that this exercise may be more about appearance than business. Mr. Bronfman is normally a secretive type who prefers not to discuss his investment plans in the media.

Yet there he was, granting interviews to carefully selected newspapers and relying on his veteran spinmeister to get the word out to others that he is indeed deadly serious and that he expects to be in charge when the deal's done. "I would not be pursuing this if we did not have a serious chance of winning," he told the august Financial Times.

He said his family would be putting cash into the deal but would not say how much. By family, he generally means himself and his doting father, Edgar M. Bronfman.

Most of the other Bronfmans want nothing more to do with his ventures after the bath they have taken since selling the family's fabled Seagram empire to Vivendi and its hugely ambitious chief, Jean-Marie Messier, in an all-stock deal in December, 2000. Even if he kicks in his family's remaining small stake in Vivendi Universal, he would still have to come up with billions in debt or equity financing.

By now the story of how Mr. Messier's schemes drove Vivendi Universal to the brink of oblivion is well known -- as is Mr. Bronfman's key role in the board revolt that led to his ouster last year.

Jean-René Fourtou, the veteran French executive who was brought in to salvage the company, has no choice but to sell the entertainment holdings to meet his goal of eliminating more than $18-billion worth of debt by the end of this year. His intention is to auction Vivendi Universal Entertainment (VUE), which includes the Hollywood movie studio, television arm, U.S. cable channels and theme parks, to a single bidding group, likely by this summer. But he wants to retain the huge music division, which Mr. Bronfman covets.

The Bronfman camp says Merrill Lynch is on board as an adviser and Cablevision Systems, a major New York area cable company, could end up as a strategic partner, contributing its cable channels to the mix in exchange for equity.

Intriguingly, Cablevision is run by Jim Dolan, the spotlight-loving son of the company's founder, who has presided over a sharp decline in its fortunes. Its less-than-stellar investments include the hapless New York Rangers hockey team.

For past corporate efforts, both Messrs. Dolan and Bronfman had the dubious distinction of making Business Week's list of the 20 worst managers of 2002. This prompted the following New York Post headline last week on their proposed joint bid: "Call 'em dumb and dumber."

Other potential buyers with better track records and deeper pockets include Viacom's Sumner Redstone, General Electric's NBC, Metro-Goldwyn-Mayer, retired oilman Marvin Davis and the potent combination of Liberty Media boss John Malone and Barry Diller, briefly the chairman of VUE and a darling of Wall Street for his money-making acumen.

A Malone-Diller combination is regarded as having the inside track. Mr. Malone is a much bigger Vivendi shareholder than the Bronfmans. Mr. Diller has the right to veto major changes in the entertainment arm, one of his demands when he folded his company's cable, TV and movie assets into Vivendi Universal last year. And both have filed sizable lawsuits against the company that would likely have to be resolved as part of any deal.

Whether Mr. Bronfman's proposed bid is more about social standing than reality or is actually a shrewd move to light a fire under an ineptly handled auction process that has so far gone nowhere remains to be seen.

But this much is likely. Sometime this summer, Mr. Fourtou and his Bronfman-less board (both Edgar Jr. and his father have stepped aside until the matter is settled) will likely pick a suitor at a lower price than the company wants.

What then emerges could be much like the old Vivendi, a largely debt-free utility, with a lucrative telephone business replacing water as a rich source of cash. That could prove a far better deal for the Bronfmans than a debt-laden effort to reacquire a bunch of entertainment assets most of the family never wanted in the first place.
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