Vivendi Said to Have Asked Comcast to Make a Bid

The latest sign that Vivendi Universal thinks it’s getting the short shrift from bidders: The French media giant is asking another suitor to enter the fray late in the auction for its U.S. entertainment assets.

A month after the deadline Vivendi set for initial bids, Comcast Corp., the nation’s largest cable operator, has been drawn into the negotiations.

After a meeting between Comcast and Vivendi executives last week, the French firm agreed to give limited financial information to the cable giant so it could value the assets, according to people close to the companies.

Comcast sources say the Philadelphia-based company is largely window-shopping and unlikely to make a formal offer for Vivendi Universal Entertainment, which includes theme parks, three cable channels and film and television studios.

“If you were really serious, you’d have come into the auction a month ago,” said one person close to Comcast. Still, he said it would be negligent for Comcast not to examine the books of a major media asset being sought by rivals.

“Comcast is getting a free look at the economics of film/TV studios, cable networks and theme parks,” Merrill Lynch analyst Jessica Reif Cohen said in a report Thursday after a story on the Comcast development in the Wall Street Journal.

Like several other analysts, she classified Comcast’s “near-term” interest as “low.”

Comcast’s emergence in the talks underscores the weakness of existing bids for Universal’s media assets, according to investment bankers and bidders. “Vivendi has been begging Comcast to come in for months,” said one banker involved in the auction, noting Vivendi’s repeated attempts to spark a bidding war.

Heading into the second round of the auction, bidders are still billions of dollars short of Vivendi’s asking price of $14 billion, plus the assumption of the entertainment assets’ $3.5-billion debt. Two years ago, Vivendi valued these same assets at $19 billion after forming the unit as part of an $11-billion acquisition of the cable channels and television studio from Barry Diller’s USA Networks Inc.

For Comcast’s part, the Vivendi dalliance is a reflection of its long-term goal of building a broad-based media giant with both distribution and entertainment assets. Most of Comcast’s revenue comes from cable subscriptions and services such as high-speed Internet access. Its content stable is small, including channels such as Golf, Outdoor Life Network, E! Entertainment Television and a few regional news and sports networks.

Any bid by Comcast for Universal’s entertainment assets would be a reversal of the cable company’s strategy. Comcast Chief Executive Brian Roberts wants to expand its channels group but prefers to build from scratch because of the growth potential. Universal’s flagship USA Network is one of the oldest cable channels and has the additional burden of high programming costs.

This month, Comcast agreed to sell its controlling stake in QVC, seizing on the opportunity to reap nearly $8 billion.

Comcast is betting on two channels it is incubating: G4, a Los Angeles-based channel dedicated to video gaming, and TV One, a joint venture with Radio One Inc. that will target African American viewers.

Many analysts question whether Comcast wants to enter a capital-intensive and unpredictable film business.

At the moment, Comcast’s top priority is fixing the troubled AT&T; Broadband cable properties it bought in November. One reason for the purchase was Comcast’s desire to use its bigger size as leverage to drive down escalating rates charged by cable channels, which are a key culprit in rising consumer costs.

So far, Comcast is ahead of schedule in rebuilding AT&T;’s antiquated systems, staunching subscriber losses, improving profit margins and paring debt.

Even so, Comcast sources say it is too early for an acquisition the size of Universal’s assets.

Wall Street says Comcast should play conservatively, given the renewed threat to its core video and Internet access business from phone firms such as SBC Communications Inc., which this week struck a broad marketing deal with EchoStar Communications Corp.