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Vivendi Drops Oilman from Asset Auction

By Tim Hepher and Merissa Marr

PARIS (Reuters) - Vivendi Universal on Tuesday axed oil tycoon Marvin Davis from a list of suitors for its U.S. entertainment empire, paving the way for talks with five media bidders still in the race, sources familiar with the talks said.

Vivendi's decision to drop the oil billionaire and former 20th Century Fox baron from its auction of Universal Studios and other assets creates an open fight between some of America's top media moguls including Liberty cable king John Malone.

In a statement after Paris board talks, Vivendi did not name those going through to the second round of an auction expected to raise at least $10 billion to help cut debt.

But the French-American firm said it had drawn up a list of "selected bidders" to take part in "in-depth negotiations." And sources said five bidding groups would be involved in the talks which Vivendi hopes to wrap up between end-July and September.

The sources, who are familiar with the auction process, said the five remaining contenders were: Malone's Liberty Media, General Electric's TV broadcasting network NBC, Metro-Goldwyn Mayer, CBS owner Viacom and Edgar Bronfman Jr., who is seeking to buy back the business.

Spokespeople for Vivendi, Bronfman, Viacom, NBC and Davis declined comment. Liberty and MGM were not available to comment.

Looking to slash debts of $14 billion and restore its junk-rated credit status, Vivendi is selling its U.S. unit Vivendi Universal Entertainment (VUE), which combines the Hollywood name behind "The Hulk" with cable TV and theme parks.

But the auction process was complicated when three bidders including Davis, according to sources familiar with the auction, expressed interest in Vivendi's separate Universal Music arm which analysts say may be worth at least another $5 billion.

"Davis is out unless they can come back with a substantially better offer," one source said. This source said the sticking point appeared to be Universal Music, the world's largest music firm which Davis wants to buy but which Vivendi prefers to keep.

Because of his age and the fact that most of his public appearances in and around Los Angeles have been for various charitable events and not business deals, many Vivendi watchers had not considered 77-year-old Davis a serious contestant.

But some believe Davis, who sold Fox film studios to Rupert Murdoch in 1985, could try to team up with another bidder and do not exclude him trying to return with a higher bid of his own.

Another source involved in the bidding said Vivendi was now steering candidates away from the music arm, part of a depressed industry which it believes is poised for recovery. Lining up bids without music would help Vivendi make better comparisons.