Edgar Bronfman Jr.'s eleventh-hour decision to try to buy Vivendi Universal’s entertainment assets was greeted Wednesday with skepticism by Wall Street and Hollywood insiders.
Given his track record, many wondered how Bronfman, the vice chairman of Vivendi’s board, would be able to pull off an ambitious play for Universal’s movie studio, theme parks, television assets and Universal Music Group, the world’s largest recording company. The assets are valued at about $16 billion, excluding debt.
After all, it was Bronfman who decided to join forces with former Vivendi Chief Executive Jean-Marie Messier when his family sold the Seagram Co. entertainment empire in 2000 to the French company for $34 billion. The deal produced disastrous results for investors, especially the Bronfmans.
Before the sale, when Bronfman headed Universal’s entertainment operations, he was criticized in Hollywood for his decision to break off the TV group from the film studio by selling a controlling interest to media mogul Barry Diller. Vivendi subsequently repurchased the TV businesses -- for more than twice the sale price.
“He’s not someone Wall Street would say is bankable,” said Michael Nathanson, a media analyst with Sanford C. Bernstein. “The last time Wall Street saw Mr. Bronfman, he was shaking Mr. Messier’s hands. That image has always been in our minds.”
Bronfman’s stature recovered a bit last summer, when he helped lead the boardroom coup that ousted Messier. But he faces an uphill battle with his plan to put together a group to bid on the Universal assets, analysts and investors say.
“He’s seen by many on Wall Street as something of a dilettante, but you can’t rule out any outcome because of the family’s wealth and interest in the assets,” New York money manager Andrew Wallach said.
Bronfman’s entry into the bidding fray will heighten the competition, analysts say. Other interested parties include Liberty Media Corp., Viacom Inc., Metro-Goldwyn-Mayer Inc., General Electric Co.'s NBC and an investment group headed by oil tycoon Marvin Davis.
Vivendi’s stock rose $1.19 to close at $17.30 on Wednesday on the New York Stock Exchange.
“The interest in the stock is building as people see the auction process emerging,” Wallach said.
Bronfman’s play would put him in direct competition with one of his former employees, Brian Mulligan. Mulligan is the architect of an offer from the Davis group to buy a controlling interest in the Universal holdings for $13 billion. Mulligan declined to comment Wednesday.
Vivendi CEO Jean-Rene Fourtou called a meeting of Vivendi’s corporate governance committee to discuss the potential Bronfman bid, Vivendi said in a statement.
The company said that to avoid a possible conflict of interest, both Bronfman and his father, who also sits on the Vivendi board, had agreed to stop attending board or committee meetings. It added, “Bronfman does not possess any recent and substantial information concerning this contemplated transaction.”
Bronfman has lined up financing from Wachovia Corp. and Merrill Lynch, sources say. They say he has had talks with several private equity firms, including Blackstone Group, which has been negotiating to buy Universal’s theme park group.
Bronfman has had preliminary discussions with Cablevision Systems Corp. CEO James Dolan about teaming up to buy the Universal assets, which Vivendi is selling to raise much-needed cash.
“We have high confidence in Mr. Bronfman’s leadership and look forward to the opportunity that lies ahead,” Cablevision said.
Under one scenario, sources say, Cablevision would contribute the programming assets of its Rainbow Media division in exchange for a stake of up to 35% in a new, privately held company.
Merrill Lynch values Rainbow, which owns American Movie Classics, WE: Women’s Entertainment, Independent Film Channel and the MSG sports network, at $4.6 billion. Combining with Universal could especially strengthen American Movie Classics, which has struggled to compete against better-heeled channels such as HBO, Showtime and Starz.
Expanding the TV group would be a key facet of his strategy, Bronfman said Wednesday.
“I love these businesses,” he said. “I would look forward to adding renewed strength and vigor to them.”
Times staff writers Claudia Eller, Jim Bates and Sallie Hofmeister contributed to this report.