Comcast Won’t Bid for Vivendi Assets

Vivendi Universal may have lost its last, best hope for getting the cash-rich deal it covets when Comcast Corp. said Thursday that it wouldn’t make an offer for the French company’s U.S. entertainment assets.

Comcast, the nation’s leading cable operator, is the latest to drop out of the marathon auction for Vivendi’s movie studio, theme parks and television operations.

Its departure positions General Electric Co.’s NBC Inc. -- which is proposing a merger of assets involving little cash -- as a front-runner heading into Monday’s deadline for final offers.

Like others, Comcast balked at the $14-billion minimum asking price the French media giant set after receiving disappointing bids in the auction’s first round earlier this summer, sources said. Most bidders place the value of the assets at $10 billion to $12 billion, according to several sources.

Vivendi’s lofty price tag prompted Metro-Goldwyn-Mayer Inc. to drop out late last month, and a consortium led by billionaire oil tycoon Marvin Davis also has walked away. The two remaining suitors willing to put up cash for all the assets -- Liberty Media Corp. and a consortium led by Vivendi Universal Vice Chairman Edgar Bronfman Jr. -- are unlikely to meet the minimum. Another bidder, Viacom Inc., is interested only in Vivendi’s cable unit.

Analysts say the reduced competition gives NBC the upper hand in negotiations.

Yet people involved in the auction question whether NBC and its parent GE might be spooked by Comcast’s move. Like GE, Comcast is a cautious and disciplined buyer, and had hired a seasoned team to examine the assets, including former Universal Studios Chief Executive Frank Biondi.

A news release issued by Comcast on Thursday raised other questions, about Vivendi’s strategy and the status of its talks with NBC.

Several hours after Comcast announced it wouldn’t bid for the assets, it issued a release saying it was exploring a cable joint venture with Vivendi that would use their collective entertainment and distribution assets to launch new channels and services.

Such a joint venture would delight Comcast, which had contemplated bidding partly because it figured it could introduce a handful of new channels by drawing upon Universal Studio’s vast library, which includes film blockbusters such as “Seabiscuit,” “A Beautiful Mind” and the “Jurassic Park” franchise, as well as the “Law and Order” television shows. Universal also owns three cable channels: USA Network, Sci Fi Channel and Trio.

For its part, Comcast controls E Entertainment Television, Golf, G4 and Outdoor Life Network. It is looking for ways to exploit its growing distribution system: Comcast now reaches one out of four American households, or more than 21 million cable subscribers.

The joint venture was proposed Thursday morning by Vivendi CEO Jean-Rene Fourtou after he was informed by Comcast executives that they wouldn’t bid, according to sources close to the situation. The sources said Comcast was stunned when Vivendi insisted on releasing a statement. Comcast favored keeping the joint venture talks private.

When Vivendi threatened to put out a statement anyway, Comcast took the offensive, these people said, issuing a release of its own. The release said Vivendi confirmed the talks wouldn’t interfere with the asset auction process.

Sources close to Vivendi said the joint venture move was a fall-back plan should the NBC talks falter.

NBC executives declined to comment, but sources close to the company said the broadcaster had downplayed the joint venture idea as a possible negotiating ploy. Said one source: “This won’t disrupt or affect the ongoing talks” between NBC and Vivendi.

One person close to the situation said the Comcast-Vivendi joint venture talks were unlikely to go anywhere as long as Vivendi’s discussions with NBC and other potential asset bidders were ongoing.

No further meetings have been scheduled between Comcast and Vivendi, these sources said.

Comcast didn’t elaborate Thursday on its decision to bail out of the auction process, although people close to the Philadelphia-based company said price was a big factor. The rush to put together a bid also put Comcast on edge, particularly because it was trying to value businesses with which it has no familiarity, such as a movie studio and theme parks.

A latecomer to the auction -- with its first meeting with Vivendi taking place only a month ago -- Comcast hustled together a team of experts to review the books, including Allen & Co., the prominent New York investment banking firm that has been involved in several previous sales of Universal Studios.

Some Comcast investors, eager to see the company focus on integrating its huge November acquisition of AT&T; Broadband, were happy with Thursday’s outcome. Though Comcast is a year ahead of schedule in its planned turnaround of the troubled AT&T; cable systems, “the timing wasn’t right,” for another major acquisition, said Aryeh Bourkoff, an analyst at UBS Warburg who follows the company.

Vivendi put the entertainment assets on the block after the ill-fated 2000 marriage between Vivendi and Universal saddled the company with more than $30 billion in debt and triggered a revolt among shareholders. Vivendi CEO Jean-Marie Messier, architect of the merger, was ousted last year and replaced by Fourtou, who has been selling assets to pare down the debt.

*

Times staff writers Meg James and Richard Verrier contributed to this report.