NBC Sale Ends Vivendi's U.S. Media Spree

Vivendi SA's (VIV.FP) $5.8 billion accord today to sell its 20 percent NBC Universal stake ends a decade- long U.S. film and television presence and gives Chief Executive Officer Jean-Bernard Levy funds to expand in emerging markets.

The stake was among assets left over from former CEO Jean- Marie Messier's $77 billion acquisition spree that transformed the one-time water utility into a global media group. Messier's purchases included a $34 billion takeover of Seagram Co. and its Universal unit, which later became part of NBC Universal. He was ousted in a boardroom coup in 2002, leaving behind a company that posted the biggest loss in French corporate history.

"For Vivendi it's a clean slate," said Porter Bibb, managing partner at Mediatech Capital Partners LLC in New York. "They never really got involved in U.S. media after Messier."

For Levy, 54, who characterized Vivendi's stake in NBC Universal as "non-core," the planned sale to General Electric Co. (GE) provides funds to push through his strategy of expanding media and telecommunications assets in Latin America, Africa and Southeast Asia, while also distributing "generous" dividends to shareholders.

"Jean-Bernard Levy's phase has been about a return to growth and profitability," said Emmanuel Soupre, who helps manage $15.6 billion at Neuflize OBC in Paris. "He's in the middle of pushing the button on the growth part."

Levy is already steering Vivendi toward fast-growing emerging markets. Last month, the company took control of GVT (Holding) SA, offering $4.18 billion for the Brazilian phone operator, raising its initial $3 billion bid to fight off a challenge from Spain's Telefonica SA (). Levy has said he will seek other purchases.

Expansion Planned

In addition to Universal Music Group, the world's biggest music company, Vivendi owns controlling stakes in SFR, France's second-largest mobile-phone operator, and Maroc Telecom, Morocco's largest telecommunications company.

It also controls Canal Plus, France's biggest pay-TV operator, and bought a majority stake last year in U.S. video- game company Activision, combining it with Vivendi Games to create Activision Blizzard Inc., producer of such titles as "World of Warcraft" and "Guitar Hero."

Levy may buy out minority holders in Vivendi's units. Last month, it bought Societe Television France 1 SA's 9.9 percent in Canal Plus for 744 million euros ($1.1 billion), and bid for the 5.1 percent owned by M6-Metropole Television SA. He may also look to buy Vodafone Group Plc's 44 percent stake in SFR and the 43 percent investors hold in Activision Blizzard, analysts said.

Few Good Assets

Vivendi, under Levy, has expanded Maroc Telecom into Burkina Faso, Gabon, and Mali.

It may look to further extend the reach of Maroc Telecom in North Africa through acquisitions, or buy smaller broadband operators to complement GVT in regions of Brazil where it doesn't yet operate, Conor O'Shea, an analyst at Kepler Capital Markets in Paris, said in an e-mail.

With the NBC Universal sale, "they will be glad to have that cash if the right opportunities come along," said Claudio Aspesi, an analyst at Sanford Bernstein in London.

Finding the right assets and dealing with varied regulatory regimes remain a challenge, said Andy Lynch, who manages $1.8 billion at Schroder Investment Management in London.

"The obvious challenges are country risk, with regulatory frameworks and the possibility of protectionism in places you're trying to invest," he said. "There's also a limited number of assets out there, and they may be tempted to overpay."

Dismantled Empire

Vivendi's decision to sell its NBC Universal stake paves the way for GE to sell control of the U.S. media group to Comcast Corp. (CMCSA), the largest U.S. cable operator. GE today agreed to buy 7.66 percent of NBC Universal from Paris-based Vivendi for $2 billion in September 2010. It will buy the rest when the GE-Comcast deal is closed, the companies said in a statement.

The $37 billion GE-Comcast transaction, announced today, will allow Fairfield, Connecticut-based GE to concentrate on its industrial and health-care businesses.

NBC Universal was created when Vivendi's Universal merged with GE's NBC television network in 2004, making the French company a minority holder of the combined group. The companies valued NBC Universal at about $43 billion when they announced the deal, making Vivendi's stake then worth about $8.6 billion.

The dismantling of Messier's empire began before Levy became CEO in 2005. Current Chairman Jean-Rene Fourtou, who took over as CEO from Messier in 2002, cut debt and sold assets such as U.S. publisher Houghton Mifflin Co.

Fourtou made Vivendi "more like a normal company," said Alexander Wisch, an analyst at Standard & Poor's Equity Research in London.

'Old Wounds'

Messier amassed billions of euros of debt in his quest to the transform the more than 150-year-old water utility once called Generale des Eaux into a rival to AOL Time Warner Inc. (TWX) and Viacom Inc. The expansion resulted in a loss in 2001 of 13.6 billion euros and of 23.3 billion euros in 2002.

Vivendi lost about 85 percent of its market value between October 2000 and mid 2002, when it had $38 billion of debt.

Messier and his former vice-chairman Edgar Bronfman Jr., now the chief executive officer of Warner Music Group Corp. (WMG), face criminal charges in Paris for alleged share manipulation. Messier, his former Chief Financial Officer Guillame Hannezo, and Vivendi have also been sued in New York by shareholders alleging they hid the true state of the company's finances.

"It's ironic that" the NBC Universal stake sale "coincides with a trial that's bringing up the old wounds," said Kepler's O'Shea. The sale "is certainly an end to taking on the U.S. media sector."

Patient Man

Levy has promised to drive growth without jeopardizing "high-level dividends" to investors or the company's investment-grade credit-rating. The company's aggregate debt stands at about 8.3 billion euros, significantly less than levels hit during Messier's days.

Vivendi had about 6,000 consolidated companies under Messier. In 2000, Messier published a book entitled "J6M.com." The title stood for "Jean Marie Messier Moi Meme Maitre du Monde," or literally, "Jean Marie Messier Me Myself Master of the World," alluding to his nickname in the French press.

"In terms of personality, (Levy's) the opposite" of Messier, said Neuflize OBC's Soupre. "He's someone who's very calm" and willing to wait for the right moment to buy out minority partners in the companies' units such as Vodafone, Soupre said.

Vivendi's exit from NBC Universal is confirmation that the company is "heavy into other commitments," Mediatech's Bibb said. "Basically, they're walking away."

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