It's Showtime: Will the GE-Vivendi deal please the critics? (page 3 of 3)

"I think there were some moving pieces. And from the Vivendi Universal perspective there was a question as to the strength of management."

The early favorite had been Liberty Mutual, the Denver cable company. But during the bidding process it made several other acquisitions, including the purchase of home-shopping network QVC, Joyce says, adding that "Liberty Media is going to win anyway because they're a large shareholder in Vivendi."


Musical Chairs
Bronfman, however, may attempt to take on Universal's music division. Vivendi pulled that business out of the bidding early on when it became clear that troubles in the music industry were dragging down the entire price for Universal, Joyce adds. "I think Bronfman may be a bidder for this business in the future, but I would not expect anything to happen for another year or so."

Universal's music division, with a 30% market share, is the leader in an industry that is deeply troubled, largely because of product piracy, adds Fader. "A lot of people are saying that NBC wanted to avoid the music business because it's an industry that is shriveling and it's hard to make money. But Universal has been much more progressive about dealing with the industry problems than any other player."

After the GE deal was announced, Universal said it would slash prices on CDs by about a third.

"If anyone is worth buying in that industry it's Universal," Fader suggests. "I believe there is a tremendous upside for music assets even though right now it's hard to imagine an industry in worse shape."

If the NBC-Universal deal is completed, most of the major media players will be married off, making this the last big merger for some time, Joyce predicts. "That's why we saw a lot of the entertainment majors sniffing pretty seriously around these assets. It's not anticipated that anything else significant is going to happen for awhile."

He speculates that cable company Comcast, which also considered the Universal deal at one point, might be interested in Disney, which lacks direct distribution beyond its ABC network. Disney executives, however, have complained that weakness at its ABC unit is due, in part, to using unsuccessful shows developed in-house by the parent firm.

Metro-Goldwyn-Meyer, which remains a freestanding studio, is another interesting company to watch, says Joyce. MGM also looked into Universal, but then its controlling shareholder, Kirk Kerkorian, made a tender offer for more shares indicating he may be interested in selling or taking the company private.

As for Vivendi, Kimberly says the rise and fall of Messier had stirred passions in France, especially because Messier had tried to make the company less French by moving its headquarters to New York and switching its working language to English. "Needless to say that upset a lot of French people," many of whom "viewed the fall of the house of Messier as just desserts. Others were embarrassed by it. They felt this was a blight on the capabilities of French industry and management."

Now, the furor is dying down. "There are still some stories in the press and those will continue until the dance with GE is concluded," Kimberly adds. "But basically it's fading from the popular concern."