Peacock's Universal Puff Up

The Peacock's nest just got lots bigger--heck, the bird just went Universal.

After months of searching for someone to unload its Universal Entertainment division on, French utility company Vivendi has entered into exclusive negotiations with NBC, which is owned by General Electric. The tentative deal will result in the new NBC Universal, a $42 billion behemoth that will put such NBC assets as Telemundo, MSNBC, CNBC and Bravo in the same company as Universal Picutres, USA Network, Sci Fi Channel and Universal Studios theme parks.

The man in charge of all that power will be Bob Wright, previously just head man at NBC. The move comes just three years after Vivendi gobbled up Universal.

All the i's need to be dotted and t's crossed before the deal is done, though. There's a slight chance that legal and tax issues could upset the merger, which has to be okayed by the U.S. Department of Justice and the European Union, and questions could be asked about the amount of foreign ownership of a U.S broadcast network. The dealbrokers don't believe there will be any problems.

Losing out on the bid to grab Universal was Edgar Bronfman Jr., whose family is Vivendi's biggest shareholder and who had, reportedly, lobbied hard over the Labor Day weekend, offering more cash and less internal disruption.

Though control by Bronfman might have made for a less drastic executive shuffle and a better deal for shareholders, the Vivendi folks clearly felt the link to blue chip General Electric was better business.

Variety reports that Wright is flying in to Los Angeles Wednesday to greet Universal top brass face-to-face, including the film honchos Ron Meyer and Stacey Snider, whom he quickly praised during an interview on CNBC as "first-class group of movie folks," who will enable a new start from "a very attractive position."

Said Meyer, "GE and NBC are two world-class organizations, and I can't think of a better parent company for Universal than them."

Movies make up about 10 percent of Universal's overall business. More importantly, though, it finally gives the Peacock its own production works. Until now, NBC was the only major TV network on its lonesome, without a Hollywood studio attached to fill its broadcast and cable networks with programming.

Universal has long produced the Law & Order franchise that has been the backbone of much of NBC's prime time. The studio also owns the cable channels USA, Sci Fi and Trio. The new deal will increase cross-promotion and double-dipping of programming on network and cable, and will allow NBC to wield more clout in negotiations with TV producers and cable outlets.

Meanwhile, over in Paris, Vivendi's top cheese Jean-Rene Fourtou, who had been looking to dump the Hollywood branch after coming to the conclusion that he just didn't get how Tinseltown operated, told Variety "a weight has been taken off me. I am relieved of a mass of worries about debt and the risks of value reduction in assets that I didn't feel we were capable of managing ourselves. It is a world far away from us. This deal is a huge step forward."

Mais oui.

Having said non to Bronfman and his backers, which included Cablevision, Vivendi CEO Jean-Bernard Levy acknowledged they had "offered a compelling transaction. But our board has made a decision and will not have any more discussion with anyone but our friends at NBC-GE."

Bronfman may eventually make a play for Universal Music, the world's largest record company. Vivendi has decided to hold on to that division for now, however. Bronfman is expected to return to his seat on the Vivendi board, a position he sidestepped during the bidding period. In a statement, he said, "I am hopeful that Vivendi's strategic direction will reward its employees and shareholders for their patient and steadfast support."

The new NBC-GE-Universal-Vivendi amis hope that unresolved issues with the resolved in about a month, so the final deal can close early in 2004. NBC Universal (or whatever it ends up being called) will be a subsidiary of GE, expected to have annual revenues of $13 billion, big, but not as big as such media giants as AOL Time Warner and the Walt Disney Co. The new company may possibly be spun off as an IPO.

To achieve the deal GE assumes $1.6 billion of Vivendi Universal's massive debt; Vivendi will get 20 percent of the new entity, plus $3.8 billion in cash and securities.

Hollywood major mover and shaker, Barry Diller, who with his company, InterActive Corp., owns about 7 percent of Vivendi Universal Entertainment, and was an insider during the Universal-wheeling-and-dealing saga, said the deal will allow NBC "to compete with the giants at chest level."

In other words, the Peacock now has good reason to puff out its chest.