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Vivendi shares jump over 5 percent

September 2003

Vivendi shares jump over 5 percent

8th Sep 2003 : Web Edition No: 11665

Editor-in-Chief: Ahmed Jarallah

NEW YORK, (Agencies): NBC emerged Tuesday as the likely winner in the months-long bidding contest for Vivendi Universal's entertainment assets as the two companies said they would enter exclusive talks to finalize a merger that would see the French seller retain a 20 per cent stake in the combined entity.

The merged company, which analysts said would have an enterprise value of about $42 billion, would be headed by NBC chairman and CEO Robert Wright, who is also vice chairman of NBC's parent, General Electric. The proposed deal would keep one of Vivendi's feet firmly planted in Hollywood while transforming NBC into the latest entertainment giant by aligning its TV properties with a bigger Hollywood operation. Vivendi directors, in a special board meeting Tuesday, gave the go-ahead for the NBC transaction. 

For Vivendi, the deal would take $1.6 billion in debt off its balance sheet and give it GE stock that will be monetized into $3.8 billion in cash. In addition to this $5.4 billion, Vivendi has the right to sell its 20 per cent stake in several years, with NBC having the first shot at buying it. In total, sources suggested that Vivendi valued the deal at close to the $14 billion it was looking for. But some cautioned that retaining a stake in Hollywood would be a gamble. "The stake could have a value of $8 billion in a few years, but you can't be sure that it will," said Ken Marlin, managing partner at media investment bank Marlin & Associates.

Either way, upon the closing of the planned NBC transaction, Vivendi said it will have achieved its goal of selling 16 billion euros of assets by the end of next year. In a joint statement, NBC and Vivendi said "the merger would create one of the world's most profitable and fastest-growing media companies." On a pro forma basis, the merged company would have 2003 revenue of $13 billion and cash flow of $3 billion. 

"This transaction would create a media company that is superbly positioned to generate substantial growth both now and in the long term," Wright said in a statement. He added that the two firms' assets "are extremely complementary" and would lead to synergies, which he did not specify. Merrill Lynch analyst Jessica Reif Cohen estimated such synergies at $400 million-$500 million, with 75 per cent of that to come from cost reductions. Observers predict that overlapping functions at NBC's and Vivendi's TV operations will lead to staff reductions. NBC and Vivendi declined comment Tuesday. 

Shares in Vivendi Universal jumped over five percent in morning trading in Paris after the French media and communications group said it was in exclusive talks with General Electric (GE) to merge their US entertainment assets in what was hailed as a "strategic deal" in the market. 

Vivendi shares were showing a gain of 5.06 per cent at 17.44 euros in mid morning trading, while the CAC 40 index of leading French stocks advanced 1.43 per cent.

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