Vivendi dilemma as Liberty ditches bid

LIBERTY Media has formally dropped out of the bidding for Vivendi Universal's US entertainment assets, leaving only two offers on the table as the French company's board meets today to decide which bid, if any, it will accept.

Liberty said the potential synergies between its own businesses and Vivendi Universal Entertainment did not justify the $14bn (£8.9bn) to $15bn sale price. Viacom is also nominally left in the bidding process but is also known to regard the sale price as too high.

The late change means that the sale is now essentially a two-horse race between NBC, the broadcast TV company owned by General Electric (GE), and Edgar Bronfman Jr, Vivendi's vice-chairman.

GE is primarily interested in combining Vivendi's cable TV assets with its own US broadcast network, its Spanish language TV and its cable networks. It has made a complex offer that would make Vivendi a 20% to 25% partner in a joint venture combining all these assets.

The offer of a share stake to Vivendi would enable GE to make the purchase without committing a lot of money upfront. In order to satisfy Vivendi's need for cash from the sale, however, NBC is offering to buy back at least part of the French group's holding at some future point. This promise should allow Vivendi to raise money against its stake immediately.

Vivendi would also be able to sell parts of its stake in the joint venture over time.

The French group may also be attracted by the prospect of a close association with another international corporation like GE.

Bronfman appears to offer Vivendi's best hope of making an outright sale, which was the original intention of Jean-Rene Fourtou, the chief executive. Although Bronfman's offer, at about $12bn, is still substantially short of the hoped-for sale price, it is understood to include around $8bn in cash.

Bronfman may increase his offer at the last minute, sources close to the negotiations said.

There is still a possibility that Vivendi will find neither offer satisfactory because it was not originally looking for a joint venture, and one or both bids may not match its need for cash.

In this case, it may decide to spin off all or some of the US assets on the stock market, although that looks less likely at this stage than it did several weeks ago, some sources said.

Charged with getting Vivendi back on its feet after the excesses of Jean-Marie Messier, Fourtou kicked off one of the media industry's biggest auctions ever in May to disentangle the group from Hollywood.