Vivendi May Decide on NBC Stake at October Meeting

Vivendi May Decide on NBC Stake at October Meeting

Sept. 21 (Bloomberg) -- Vivendi SA, owner of the world’s largest music company, may decide at an Oct. 14 board meeting to sell its stake in NBC Universal, according to a person with knowledge of the situation.

Vivendi may choose to sell the 20 percent stake because the unit isn’t performing as well as the company’s majority-owned operations, said the person, who requested anonymity because the discussions aren’t public. General Electric Co. owns 80 percent of New York-based NBC, which operates a broadcast television network, cable channels and the Universal film studio.

NBC’s total enterprise value may be $21 billion to $23 billion, including an estimated $5.1 billion in debt, Sanford C. Bernstein & Co. said last week. Chief Executive Officer Jean- Bernard Levy has bulked up all of Vivendi’s businesses through acquisitions in the past two years. The company is extending its reach in emerging markets and announced plans this month to buy Brazilian phone operator GVT Holding SA for about $3 billion.

“Vivendi now has some potential alternate uses for capital, including the tender for GVT and the buyout of minorities at Canal Plus,” Chris Marangi, an analyst with Gabelli & Co. in Rye, New York, said in a phone interview. Canal Plus is Vivendi’s pay-TV unit.

Vivendi obtained the NBC stake with the sale of its media assets to GE in 2004. Every year between Nov. 15 and Dec. 10, the Paris-based company may notify GE of its intent to sell the shares in the market, which could lead to a public offering, according to Vivendi’s annual report. That option extends through 2016. GE can preempt an IPO by buying the holding, the report says.

‘Non-Core’

Levy said at an investor conference in New York on Sept. 16 that the company hasn’t decided whether to sell.

Vivendi spokesman Antoine Lefort declined to comment on the company’s plan for NBC Universal and on the board meeting. Anne Eisele, a GE spokeswoman, declined to comment on Vivendi’s potential decision beyond previous statements.

“Our strategy is to consider this asset as non-core,” Levy said of NBC on a conference call with analysts Sept. 1.

If Vivendi decides to exit, there are four possible outcomes, Bernstein analysts, including Claudio Aspesi, Michael Nathanson and Steven Winoker, wrote in a Sept. 15 research note.

GE may use its right of first refusal and buy the stake, Vivendi may sell the shares in the public market with the process controlled by GE, Vivendi may agree to sell in a private placement to a third party or the contract may be restructured for an initial public offering of all of NBC, they wrote.

Less Attractive

Selling the shares in the public market is less attractive because of depressed valuations and because it would require greater disclosure by NBC, the analysts said. GE may buy the stake at “an attractive price” or find a third party buyer, possibly private equity, if the company prefers to hold onto cash, they said.

Any payout to Vivendi is capped at $4 billion in the first year after a sale, according to filings. If 20 percent of NBC is valued at more than that, the remainder is paid in the following years.

Levy merged Vivendi’s video-game unit with U.S. video-game maker Activision Inc. to gain a majority stake in the world’s biggest games company and expanded its Maroc Telecom unit’s operations into other African countries.

In half-year results reported this month, Vivendi said adjusted net income, or profit excluding one-time gains and some costs, rose 8.1 percent to 818 million euros ($1.2 billion), lifted by a seven-fold rise in second-quarter profit at the Activision Blizzard games unit.

The NBC unit posted a 41 percent drop in second-quarter profit on lower earnings from broadcast television and its film studio, Fairfield, Connecticut-based GE said in July.

Vivendi’s Levy said on Sept. 9 that the company has a “permanent commitment to distribute high-level dividends to investors.”

Vivendi rose 7 cents to $20.71 euros in Paris trading. GE gained 26 cents to $16.76 at 4 p.m. in New York Stock Exchange composite trading.

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