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Bronfman Stays in Round 2 Of Bids for Vivendi Assets

July 2003

Bronfman Stays in Round 2 Of Bids for Vivendi Assets
Ex-Owner of Music Group Hopes to Get It Back in Time

By Frank Ahrens
Washington Post Staff Writer
Friday, July 4, 2003; Page E03

Edgar Bronfman Jr. was helicoptering from one business meeting to another Tuesday when the phone call came in from an aide: Vivendi Universal has pulled its music business off the table, the voice shouted over the cell phone static and chopper roar. What do we do now?

It was disappointing news for Bronfman. The former head of Universal Music Group, Universal motion pictures and television and Universal theme parks is trying to buy back the assets he sold to Vivendi Universal in 2000, before that company's collapse took much of his family's fortune down with it.

The piece of that entertainment empire he cherished the most was Universal Music Group, the industry's largest music company, with rappers Eminem and Nelly, country legend Earl Scruggs, tenor Placido Domingo and shock-rocker Marilyn Manson. Bronfman himself was something of a songwriter, having penned hits for singers such as fellow Canadian Celine Dion.

Vivendi Universal decided to remove the music business from the bidding out of concern it would not fetch a fair price. Slumping compact disc sales over the past few years have driven down the value of all five major music companies. The company figured it would keep the record giant in the fold until the music industry rebounds.

I've got to call the rest of my team, Bronfman told his aide, according to a source familiar with the conversation.

Moments later, he called back: Let's continue to pursue what's left, he told his aide. As the source close to Bronfman recounted the conversation, the former media mogul said he thought the assets should be run as a unit so the Universal brand name could be leveraged as strongly as possible. Maybe we'll get another shot at the music company, Bronfman said.

With that, Bronfman moved into the second round of bidding, joining Liberty Media Corp. and Metro-Goldwyn Mayer.

Bronfman is the only remaining bidder who wants Universal Music. Liberty and MGM are more interested in the movie studio and its vast film library, and the television unit, which has cable channels such as the Sci-Fi Channel and USA Network. NBC, owned by General Electric, wants to partner with the television and movie assets of Vivendi Universal, but has offered no cash. And Viacom Inc.'s CBS has similar plans.

Vivendi Universal has not set a deadline to make its final choice nor has it fixed a minimum price it would accept for the entertainment assets, said a source close to the company. Vivendi Universal officials will meet with Bronfman and NBC executives next week to go over their plans in detail, sources said.

Yesterday, Liberty announced it was paying cable giant Comcast Corp. $7.9 billion for its 52 percent stake in QVC, the home-shopping channel co-owned by Comcast and Liberty. Liberty had been considered a front-runner for the Vivendi Universal assets because it was cash-flush, saving itself billions by pulling out of the bidding for Hughes Electronics Corp.'s DirecTV and having disposed of $1.71 billion in AOL Time Warner Inc. stock earlier in the year.

It is unclear how Liberty's purchase of QVC will affect its bid for Vivendi Universal's entertainment assets. A spokesman for Liberty did not return a phone call yesterday.

"The question is, does [Liberty chief executive John L. Malone] have enough cash?" said Ken Marlin, managing director of media industry investment bank Marlin & Associates. "He does, in our estimation. He's got $15 billion in . . . cash and debt capacity and we think he has the wherewithal to do both transactions," meaning the QVC and Vivendi Universal purchases.

"All that being said," Marlin added, "my money's still on Edgar Bronfman."

Marlin said Bronfman is the most motivated buyer, he knows the assets better than any other bidder and his investment firm, the Blackstone Group, "really wants to do an entertainment deal."

© 2003 The Washington Post Company

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