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GE Outlines Options If Vivendi Opts Out Of NBCU

Spokesperson lays out three scenarios: "bringing a new partner into NBCU, proceeding with an IPO or buying Vivendi's stake." 9/09/2009 11:07:00 AM Eastern

Several financial industry sources said Tuesday that General Electric is paving the way for a possible change of the ownership structure at media company NBC Universal. The media industry’s favorite fall parlor game is guessing what Vivendi will do with its 20% holding and how that will affect NBC Universal’s future within GE. That decision isn’t due until November, though sources suggest GE is already sounding out the market.

One highly placed Wall Street executive said the Vivendi situation was forcing GE’s hand somewhat: "It may not be a strategic sale, it may be a public offering, but no decision has been made." One analyst, who did not wish to be named, said GE has already begun circulating proposal documents: “Talk to people in the media banking community; there is a book out on NBCU,” said this analyst adding, “The crux of the matter is that right now, there is little or no value in the GE stock price from owning NBCU…The Vivendi thing pushes it from a timing perspective and adds a little more urgency to the situation.”

When asked whether GE is actively looking for new partners for NBC Universal and whether there is a proposal document or so-called “book” in the market,  GE spokeswoman Anne Eisele told B&C, "As you know, Vivendi has an annual option, exercisable later this year, to sell its stake in NBCU in the public market. If Vivendi determines to exercise its option, GE has several options, including bringing a new partner into NBCU, proceeding with an IPO or buying Vivendi's stake."

The statement predictably doesn’t mention an outright sale of NBCU, a subject of countless rumors in the media business.  In the 2008 company annual report, CEO Jeffrey Immelt wrote, “Should we sell NBCU? The answer is no! I just don't see it happening, not before the Olympics, not after the Olympics," he said. "It doesn't make sense.”

GE’s latest official comment about the firm’s potential plans comes on the heels of a report from JP Morgan suggesting that NBCU could be worth between $30 billion to $35 billion. Whether or not it was a result of the JP Morgan report Tuesday, there was once again some buzz in the business about potential movement at GE about NBCU. GE stock closed Tuesday up 4.54% at $14.50. The S&P closed up 0.88%.

It remains unclear whether Vivendi will ultimately pull the trigger on a sale. Vivendi’s window usually falls in mid-November and ends the first week of December. In that time frame Vivendi can notify GE of its intention to sell and GE can buy the shares or let Vivendi sell them in the public market of the following year. Next year would perhaps be a better environment to make a placement of this sort given that the worst of the recession may be over and heavy political dollars should again start buffering ad markets. Investors also appear more willing to think about good-sized mergers and acquisitions following Disney’s $4 billion deal for Marvel.

Another chewed over scenario has Vivendi making an audacious play for the entire company. A spokeswoman for Vivendi declined to comment on the company's future plan with regard to its stake. Speaking on a conference call last week, Vivendi CEO Jean-Bernard Levy described the NBCU stake as “non core,” adding, “There is absolutely no interest to raise our stake in NBC Universal, I want to say that once more.” NBC Universal was valued at around $44 billion when the two firms got together in 2004.

In a long-running game of media industry fantasy football, a whole host of corporate names have been rumored as potential buyers for NBC Universal should it become available, though the list usually begins with Time Warner and Comcast.

Some have even floated IAC/InterActiveCorp (IAC chief Barry Diller owned a portion of Universal at the time of its merger with NBC) though NBCU might be too expensive even for his deep pockets. Other possible interested parties – in addition to private equity money – that have been mentioned by industry insiders include Liberty Media, Google or Microsoft.

November