Vivendi shares rise

Pending sale of NBC Uni stake boosts investor confidence

NEW YORK -- Vivendi shares rose Tuesday as investors cheered a tentative agreement to sell the French telecom and media firm's 20% stake in NBC Universal to partner General Electric for $5.8 billion.

While some analysts had hoped for a $6 billion price tag, a sale would get Vivendi out of a non-core business and give it additional financial flexibility to pursue acquisitions in higher-growth markets.

In Paris, Vivendi shares closed up 4% at 19.95 euros. "We see the sale of NBC as a strategic positive given the need to reduce leverage," said UBS analyst Polo Tang.

It had emerged late Monday that GE and Vivendi had agreed on a price in an arrangement that clears the way for U.S. cable giant Comcast Corp. to sign and announce a deal in the coming days to buy a 51% stake in NBC Uni from GE.

Analysts are still waiting for a formal announcement to gauge certain key details. For example, Tang cautioned Tuesday that "it remains unclear when exactly cash will be received from the sale."

Reports have said that Vivendi could receive one-third of the value from the sale upfront.

Meanwhile, in case of a sale, Vivendi will lose a more than $300 million annual dividend from NBC Uni.

The Vivendi-GE and Comcast-GE deals could both be announced in the coming days, with the former pulling down the overall valuation of the latter a bit below $30 billion.

Comcast is expected to pay up to $6 billion in cash and contribute its cable networks into a joint venture for a 51% stake in NBC Uni.

While this would finally get Comcast a big content play, which it has sought for years, and at a historically low price, many on Wall Street are concerned about the risk of what would be the biggest media deals in years.

"We continue to believe that this deal will cause Comcast to be in limbo for more than 12 months as 1) Washington regulators deliberate on the deal's merits and 2) the investment community tries to determine the potential for synergies between content and distribution," Collins Stewart analyst Thomas Eagan said Tuesday. "There are financial risks should NBC Uni not generate the expected EBITDA due to a pullback in ratings or ad spending or incremental integration costs."

He also referenced traditional shortfalls of media mergers. "Regarding synergies, we have not seen significant benefits of companies owning both content and distribution, yet perhaps Comcast could create additional synergies," Eagan said.

Among key opportunities: he cited are the potential "to rationalize the TV affiliate structure."