NBC, Vivendi Make it Official

NBC finalized its $14 billion merger with Vivendi Universal, creating the media conglomerate NBC Universal. NBC will own 80 percent of the new company and Vivendi will own 20 percent. The deal, which came to fruition after Vivendi declared earlier this year that it wanted to sell assets in order to reduce debt and focu
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NBC finalized its $14 billion merger with Vivendi Universal, creating the media conglomerate NBC Universal. NBC will own 80 percent of the new company and Vivendi will own 20 percent. The deal, which came to fruition after Vivendi declared earlier this year that it wanted to sell assets in order to reduce debt and focus on its telecommunications business, entails NBC paying $3.8 billion in cash and taking on $1.7 billion of Vivendi's debt. Vivendi can begin selling its stake in 2006 over a period of several years. Approval by United States and European Union regulators is required for the merger, but the deal is expected to close in early 2004.

The new corporation means NBC will own a major film studio, which had been a hallmark of the other major U.S. television networks for years. Besides the peacock network, NBC Universal will also house Universal's movie and television studios, 14 local television stations, cable networks such as USA, CNBC and Bravo, and interest in five theme parks. Bob Wright, NBC's chairman and chief, will head the new company, and Jeff Zucker, NBC's head of entertainment, will reportedly oversee Universal's television properties. Its estimated $13 billion in annual revenue is still relatively small when compared to media conglomerates AOL Time Warner, which had $41 billion in revenues last year, and Walt Disney Co., which had $25 billion.

NBC executives expect the company's revenues to grow between 5 and 10 percent per year, but in an AP interview, media consultant Pascal Volle of Mercer Management Consulting doubted that the businesses would meet that estimate. "I think NBC has gained a membership card for the top integrated media companies. It is a company with a full set of video entertainment assets. What I can't see in there is the engine for growth."

Former Vivendi Universal chairman Barry Diller complicates the merger with a 7 percent stake in VUE that he values at $2.4 billion. He has claimed in SEC filings that the terms of his $10 billion sale of his USA Networks cable and production company to Vivendi give him a say in the transfer of VUE assets.

Diller already has a lawsuit pending against Vivendi over interpretation of taxes in the USA Networks sale, which gave Vivendi a 10 percent share in Diller's InterActiveCorp. Vivendi would like to sell the share back to him for $2 billion in hopes of a settlement. The company's executives say Diller has no veto power over the merger and told analysts that it expects to buy out his stake before the deal closes.