Vivendi may offload its 20% stake in NBCU

Vivendi CEO to address Communacopia Conference

NEW YORK -- It's that time of year again when Wall Street plays its favorite year-end guessing game of whether Vivendi will look to sell its 20% stake in NBC Universal. This year though, chatter that the conglomerate will sell to reinvest cash into faster-growing telecom businesses is hotter than ever before, especially after Vivendi CEO Jean-Bernard Levy recently said that the stake was "non core" and reiterated that his firm wouldn't be a long-term investor in NBC Uni.

With Vivendi's window to sell its NBC Uni interest opening in mid-November, another key question is what 80% owner General Electric's next move would be.

NBC Universal CEO Jeff Zucker in an appearance here Tuesday left any official first word to Vivendi.

Speaking at the annual Goldman Sachs Communacopia Conference, he said: "Jean-Bernard will be here tomorrow," and he wanted to leave the issue up to him. "Vivendi have been fantastic partners. (But) they have been clear that at some point they would do something."

He also said that NBC Uni has been "a terrific success for both companies."

NBC Uni was valued at around $44 billion when the current ownership structure was formed in 2004.

A recent JP Morgan report pegged its current value at $30 billion-$35 billion, meaning Vivendi's stake could be worth $6 billion-$7 billion.

And on Tuesday, Sanford C. Bernstein analysts, including media and entertainment analyst Michael Nathanson, put the overall entertainment firm's enterprise value at $21 billion-$23 billion. "This is based on the best comparables including the three large media conglomerates that most resemble NBC U's mix of business: News Corp., Time Warner and Walt Disney," they wrote.

Vivendi can notify GE of its plan to sell between Nov. 15 and Dec. 10 this year.

If it chooses to offload its stake, which it can do annually through 2016, GE can buy the stake at market value with first-year payments capped at $4 billion. The two can also find a third-party buyer or GE can let Vivendi sell the stake in the public market.

Observers expect a healthier media deal market in 2010, especially after Disney's recent play for Marvel, and better advertising trends in the post-recession stage and thanks to mid-term elections.

While that could make an IPO more attractive, analysts see the first two scenarios as the likeliest. GE will likely want to avoid the alternative of an IPO of the stake given it would require more detailed financial disclosures and valuation risks, they argue.

While the annual debate about Vivendi's options also usually leads to talk that GE could sell all of NBC Uni, chairman and CEO Jeff Immelt has continued to reaffirm his commitment to the business.

"Vivendi's management should exercise its exit rights in light of the need to invest in assets that will sustain its earnings and cash flow per share (and ultimately its dividend) after 2011," the Sanford team said. "We do believe GE can muster the cash necessary to buy out its stake if necessary, and current valuation levels are probably still attractive to GE, but we believe the company will prefer to keep its powder dry for continued support of GE Capital and other acquisitions."

They also concluded that from a GE shareholder perspective, "we favor a third-party purchase but buying it at an attractive price is a reasonable back-up."

A Vivendi spokeswoman had no comment beyond saying: "We look at the NBCU stake every year in November."
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