France's Vivendi still (Hearts) NBC Universal
French company Vivendi plans to keep its 20% stake in NBC Universal — at least for another year.
Vivendi's decision, announced today, eases a potential headache for General Electric Co., which owns 80% of NBC Universal. If Vivendi had exercised its option, GE would have had the right to buy the stake before it was offered to the public.
For GE, the timing would not have been ideal. The industrial giant has stumbled this year, squeezed by the mortgage meltdown, tight credit markets and a weakening economy. Nearly 40% of GE's revenue comes from its financial services division. GE's stock has tumbled more than 50%.
Four years ago, GE acquired Vivendi's profitable entertainment assets, which included the Universal Studios theme parks, Universal Pictures and cable channels USA Network and Sci Fi, in a merger that strengthened NBC's portfolio and diversified its revenue. At the time, Vivendi received $3.4 billion in cash and the 20% stake.
The deal contained a complicated provision for Vivendi to unwind its holdings at "fair market" value. Each year, Vivendi has until early December to notify GE of plans to dispose of its stake.
"It's not the right time to sell," Vivendi spokeswoman Flavie Lemarchand-Wood said, citing market conditions. Investors are sour on the shares of media companies, which are trading at historically low multiples, because most generate the bulk of their revenue from advertising.
Besides, Lemarchand-Wood said, Vivendi is not in need of cash and has available credit lines of nearly $7 billion. "And we are very happy with NBCU's management team," she said.
NBC Universal declined to comment. In 2007, NBC Universal revenue totaled $15.4 billion and operating income of $3.1 billion.
— Meg James
