Tuesday, September 2, 2003

PARIS (AP) — General Electric Co.’s NBC emerged the winner yesterday of a tortuous, months-long contest for the entertainment assets of Vivendi Universal, including a major movie studio, three cable channels, a television studio and several theme parks.

NBC and Vivendi said they intend to combine the assets into a new company, which most likely will be called NBC Universal, though a final deal has yet to be settled. The companies expect to complete the last phase of talks by the end of the month.

A merger would create a major media player with $13 billion in annual revenue that would include NBC’s television network, an array of cable networks like MSNBC, CNBC, USA and Sci-Fi, and Universal Pictures, whose recent films include “Seabiscuit” and “The Hulk.”

It also would unite Universal Television, the studio behind the popular program “Law and Order,” with the network that airs it in the United States. “The studio side is almost part of NBC,” Bob Wright, NBC’s chairman, said in an interview.

For NBC, the deal would give the network more heft in an industry dominated by titanic companies like AOL Time Warner Inc. and Viacom Inc., which owns MTV and CBS. NBC has been the only major network not owned by a larger media conglomerate. Walt Disney Co. owns ABC, and News Corp. owns Fox.

Vivendi’s decision to enter exclusive merger talks with GE ended a months-long auction process that attracted the interest of at least five other companies. Last week, Vivendi trimmed the list to two — NBC and a consortium including Edgar J. Bronfman Jr., former chief executive of Seagram Co.

Mr. Bronfman, who once controlled the Universal properties when they belonged to Seagram, led a last-ditch lobbying effort over the weekend to salvage his bid, a source familiar with the matter told the Associated Press.

For Vivendi, the deal offered an opportunity to trim debts — which totaled $13 billion at the end of July — run up during a buyout spree under Jean-Marie Messier, who was ousted as chief executive in July 2002. Vivendi had hoped to fetch about $14 billion for the Universal assets.

Shedding the assets takes Vivendi further away from Mr. Messier’s lofty ambition of creating a media powerhouse. A deal with GE would leave Vivendi as a European mobile phone and cable-TV service provider with a minority stake in a big U.S. entertainment company.

For GE, already one of the world’s most diverse conglomerates, the deal would extend its realm into Hollywood movies and theme parks while strengthening its NBC brand.

“This deal makes sense because NBC needs to be in everything,” said Brian Abbott, a professor of marketing and management at Long Island University. “They need to be in motion pictures, publishing and music as well. This is a logical extension of their brand.”

Universal’s U.S. cable assets — USA, Sci-Fi and Trio — would join the NBC stable that includes the Bravo network and Spanish-language broadcaster Telemundo. The new company also would have interests in five theme parks.

GE would hold 80 percent of the combined company, and Vivendi would own 20 percent. Mr. Wright, who is also vice chairman of GE, would head the new company.

If the deal is closed, shareholders of Vivendi Universal Entertainment will receive $3.8 billion in cash and stock and $1.6 billion in debt reduction, Vivendi said.

After the deal was announced, Vivendi’s U.S.-traded shares jumped $1.35, or 8 percent, to close at $18.25 on the New York Stock Exchange. GE’s shares rose 87 cents, or 3 percent, to $30.44.

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