If Vivendi Blocks NBCU-Comcast Deal, There Will Be Fallout

It could just be posturing, but Vivendi (VIVEF) says it is in no hurry to sell its 20 percent stake in NBC Universal, which would trigger a $30 billion deal to make Comcast (CMSCA) the majority owner. Even if the transaction does not occur, there will be interesting fallout.

Vivendi is in talks to unload its minority stake to the highest bidder. That could be NBCU co-owner General Electric (GE), a third party, or the public (in a stock offering). Vivendi has until 2012 to sell its stake during  an annual window from Nov. 15 to Dec. 10. Sources close to the deal say cash-strapped GE would place $12 billion against the new NBCU to buy out Vivendi. GE would be a minority owner in NBCU with Comcast.

“Vivendi is in no hurry,” Simon Gillham, the French company’s vice president for communications, told Bloomberg. “Vivendi is reviewing its options.” While that might just be negotiation rhetoric, Vivendi could opt not to sell even though it needs the proceeds for non-media acquisitions. Comcast officials declined comment on a potential deal during the company’s quarterly conference call Nov. 4.

A thwarted deal would have consequences for Comcast, NBCU, GE and the media industry:

• Comcast could continue pushing for a NBCU deal under other scenarios. For instance, Comcast could seek majority control of NBCU if GE decides to publicly spin it off.  Vivendi could remain a 20 percent stakeholder.
• Comcast could continue to battle its falling stock price and anxious stockholders. Pursuing NBCU has reinforced the notion that CEO Brian Roberts is determined to own a content company. Comcast made a failed bid for Walt Disney (DIS) in 2004.
• Comcast could pursue smaller content companies. Companies that could be deal friendly include Lions Gate Entertainment (LGF), DreamWorks (DWA), Scripps Networks Interactive (SNI), Discovery Communications (DISCK) and Take Two Interactive (TTWO) and Electronic Arts (EA).
• NBCU could attract other suitors. GE has declared its intention to sell NBCU as it continues to reshape its industrial and financial portfolio.  Other potential acquirers could include John Malone’s Liberty Media (LMDIA) and Rupert Murdoch’s News Corp. (NWS)
• Convergence could become a media deal catalyst again. If Comcast, the nation’s largest cable operator, believes combined content ownership and distribution is a good thing, others may follow. That would buck the recent trend in which conglomerates such as Time Warner have been selling off non-core assets to focus on either content production or distribution.
• Media values could be reset. The dearth of media deals and the decline in stock prices have created uncertainty about the recovery of media company prices. The premium Comcast appears willing to pay for a 51 percent ownership stake in NBCU will be used as a benchmark to boost other media company multiples.
• Other cable operators also could seek backup strategies. Cable operators publicly resist the suggestion that their customers may cancel their expensive cable subscriptions now that they can increasingly download streaming video on the Internet. Owning the content and expanding into mobile wireless could be defense measures.