Media group NBC and parent company GE have mostly sat out what analysts describe as the ‘media/entertainment feeding frenzy’ in the past 10 years. But when it made its play, it moved swiftly, stealing VUE out from under the noses of more fancied bidders.
In a fast-paced, constantly changing and complex auction for VUE, GE/NBC out-manoeuvred the competition by making a compelling case to Vivendi. It was one that would allow Vivendi to realise long-term value by maintaining a significant stake in NBC Universal. Other bidders assumed Vivendi would focus more on maximising near-term liquidity than creating long-term value for its shareholders. In the end, the combined company, with an estimated value of $43bn, will be 80% owned by GE and 20% by Vivendi, which in turn will be able to monetise its stake at fair market value beginning in 2006.
It’s a notable deal, not least because it represents a smart strategic move for NBC, strengthening the company’s position as a major content provider and packager. $400m to $500m in annual synergies have been identified. The new company will have one of the broadest reaches of any television media company with some of the most compelling brands in the media business.
The complex transaction structure provides flexibility and risk mitigation to GE while meeting key sale parameters of Vivendi (immediate liquidity of approximately $5bn). Significantly, GE utilised NBC stock, valued at a media multiple, as acquisition currency, unlocking hidden value in NBC.
