Vivendi Said to Peg Assets at $14 Billion

Increasingly confident that it holds the upper hand in its closely watched auction, Vivendi Universal has decided it wants about $14 billion for its U.S. entertainment assets, sources close to the negotiations said, putting the asking price markedly higher than the offers on the table.

A Vivendi spokeswoman declined to comment Wednesday. But analysts said the company was clearly disappointed with the bids last month for the Universal movie studio, theme parks and television operation. In fact, analysts have valued the businesses at about $14 billion to $15 billion.

Still, asking $14 billion “is a pretty bold move,” said Drew Borst, an analyst with Sanford C. Bernstein & Co. in New York. “But at the very least it’s a testament to the fact they are dissatisfied with the bids they’ve received so far.”

It also is further evidence of Vivendi’s growing belief that it can set the terms of the auction process and doesn’t need to rush into a fire sale, thanks to its improved balance sheet. Vivendi nearly went bankrupt last summer because of heavy debts, and it is selling off the assets to raise cash.

“They’re trying to raise the bar,” said Andrew Wallach, managing partner of Cumberland Associates, an investor in Vivendi.

“They’re telling people, ‘It’s time to fish or cut bait.’ ”

To gain leverage, Vivendi has been laying the groundwork for a possible public offering of the Universal group sometime next year as a fallback option if the bids come up short.

Whether it settles on a sale or an IPO, the company intends to present a plan to shareholders by September, sources briefed on the company’s plans said.

Still, the demand for $14 billion is a gamble for Vivendi Universal Chief Executive Jean-Rene Fourtou, who has so far spurned demands for exclusive negotiations and rejected two bids, most recently an $11.5-billion offer from Metro-Goldwyn-Mayer Inc.

Bidders have grown increasingly critical of Fourtou’s handling of the auction process, complaining that Vivendi and its advisors -- Goldman Sachs Group Inc. and Citigroup Inc. -- have given mixed signals on how much the company was seeking and what sort of timetable it was operating under.

After the first round of bids, many thought that Vivendi would narrow the field of candidates by mid-July and that the company wanted at least $11.5 billion. Vivendi has since disavowed any timetable or floor price.

Stung by criticism that the auction has been chaotic, Vivendi executives have been more proactive of late in their dealings with bidders.

Fourtou personally met with some of the bidders in New York last week. Senior company executives will hold similar meetings next week in Los Angeles. Vivendi executives also agreed to supply MGM with more financial information, a key concession to keep the studio in the auction.

The higher asking price probably will narrow the field of six suitors, which also includes Liberty Media Corp., General Electric Co.’s NBC, Viacom Inc. and two investment groups. But it’s unclear who might drop out.

The perceived front-runner, Liberty Media, is still interested but has less incentive to make a deal because of its recent acquisition of Comcast Corp.’s stake in QVC, the world’s largest home shopping network.

Meanwhile, an investment group led by Vivendi Vice Chairman Edgar Bronfman Jr. will go forward with a second-round bid even though one of the most coveted assets -- Universal Music Group -- was taken off the table.

Viacom is primarily interested in Universal’s cable channels, Sci Fi in particular. Vivendi, however, would prefer to sell the entertainment assets as a whole to avoid triggering hefty tax liabilities.

NBC also is interested but isn’t putting any cash on the table. It proposes merging NBC with Universal’s TV and film group.

A consortium fronted by oil tycoon Marvin Davis has been wavering about whether to remain in the auction after its last bid -- about $15 billion for all of Universal, including the music unit -- was spurned.