Marvin Davis issues ultimatum to Vivendi Universal

  • Business
  • Wednesday, 05 Mar 2003

LOS ANGELES (AP) - Former oil tycoon Marvin Davis has threatened to withdraw his $20 billion bid for Vivendi's Universal entertainment assets if the company does not negotiate exclusively with him, a person familiar with the talks said. 

The issue is expected to be resolved Thursday at a Vivendi Universal board of directors meeting in Paris, the person told The Associated Press. 

Davis, annoyed with the slow pace of talks and Vivendi's effort to consider competing bids for its U.S.-based entertainment companies, sent a letter containing his ultimatum to Vivendi Universal last week, according to the source. 

Davis would not comment on the negotiations. A spokesman for Vivendi Universal did not immediately return a phone call for comment. 

Cash-strapped Vivendi wants to sell Universal Studios, its Universal theme parks and television production company. 

According to a recent report in the Financial Times, Vivendi has decided not to sell its Universal Music Group. 

Rumors also have circulated about interest in its games division, which would likely be sold separately. 

Davis is only interested in buying all the assets, the source said. 

Media reports also have said other possible buyers _ including Viacom, MGM and NBC - have expressed interest in parts of Vivendi's entertainment portfolio, specifically the Sci-Fi channel and USA Networks. 

Davis, who once owned Fox Studios, has offered to buy all the entertainment assets for about $15 billion in cash and the assumption of about $5 billion in debt. 

Analysts have questioned whether Davis could raise the financing for such a deal. 

Last week, the Davis camp let it be known that the Carlyle Group, a top private equity firm, had joined their bid, an attempt to remove any doubt that Davis could complete the ambitious deal. 

But the offer could be rescinded if the Vivendi board tries to create a bidding war for the entertainment assets. 

"Either the board will communicate to the Davis group they are prepared to enter into an exclusive negotiation or they won't, and if they don't the Davis offer will be off the table,'' the person familiar with the talks said. 

One wild card is whether Barry Diller, who owns or controls nearly 7 percent of Vivendi Universal Entertainment - the joint venture that holds Vivendi's entertainment assets - will make his own bid. 

Diller heads USA Interactive, which comprises the online businesses that were peeled off from his USA Networks last year. 

In December 2001, USA sold its entertainment assets to Vivendi Universal for $10.3 billion. 

The transaction gave USA Interactive a 5.4 percent interest in VUE, while Diller himself retained a 1.5 percent stake. 

Diller told The Associated Press he would consider bidding for some of the assets as long as he would not have to run them full-time. 

"USA has both an equity and preferred interests in the Universal assets that are not insignificant, so their disposition is of importance to USA,'' Diller said. 

"Beyond that, if there is opportunity and if, in fact, it would not require my executive services, we'll pursue it.'' 

USA Interactive runs a variety of Internet businesses, including Ticketmaster, and Expedia. It also runs the Home Shopping Network. 

Diller serves as co-chief executive officer of VUE, along with Vivendi Universal CEO Jean-Rene Fourtou, a position that creates an apparent conflict since he advises Fourtou on the fate of Universal while holding a substantial financial stake in the assets. 

"A lot of people would say this is absurd, this person has a prima facie conflict,'' 

Diller said. "I don't see it that way and I don't think my partners see it that way. If they did, since I don't receive any compensation for services in this dual role and since we each could end it instantly, I think they would.'' 

If Davis were to buy the Universal assets, Diller would almost certainly be replaced at VUE. Davis has made it clear he wants a full-time executive running the company. 

David and Diller dislike each other, a conflict that dates back to when Davis owned Fox and Diller ran the studio. 

While not commenting specifically on the Davis bid, Diller said any of the possible outcomes, including one that leaves him with no control over Universal, would be acceptable. 

"While there can always be consequences that are not knowable and that are not good for us, me and my colleagues cannot figure out anything that can happen in this that is against our interests,'' Diller said. 

"And consequently, any of the options that everybody speculates about, every single one of the options, they are all essentially OK with us, plus a nickel, minus a nickel.'' - AP 

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