BOSTON: General Electric Co and Vivendi SA agreed on a $5.8 billion valuation for the French telecommunications company's 20 percent stake in NBC Universal, according to two people with knowledge of the discussions.

A deal with Vivendi would clear the way for GE, NBC Universal's 80 percent owner, to create an entertainment joint venture controlled by Comcast Corp, the largest US cable company. Final agreements on both transactions may be announced as soon as this week, said one of the people, who declined to be named because the discussions are private.

The agreement on price was reached after GE Chief Executive Officer Jeffrey Immelt and Vivendi Chief Jean-Bernard Levy met in France last week. The sides had been less than $500 million apart and were discussing how payments would be structured, two people said on Nov 25. Vivendi extracted more money than analysts expected and concessions that protect the Paris-based company against the risk regulators will scuttle the deal.

"It worked out a little higher than what I had anticipated," said Tuna Amobi, a New York-based analyst at Standard & Poor's who covers the entertainment industry. "Vivendi was able to squeeze out an additional $250 million."

Selling Comcast control of NBC would let Immelt use proceeds to concentrate on GE's financial, health-care and industrial businesses, which include the world's biggest maker of jet engines, locomotives and medical imaging machines. GE would initially have a minority stake in the NBC Universal entity, selling the rest over a number of years.

GE agreed to make a payment of as much as $2 billion to Vivendi if the separate GE-Comcast transaction doesn't close by the end of 2010, said one of the people.

Vivendi sought cash upfront and assurances of a payment if Comcast's control of NBC Universal doesn't pass regulatory review, Amobi said.

Concessions

Flavie Lemarchand-Wood, a Vivendi spokeswoman, declined to comment, as did Anne Eisele, a spokeswoman for GE. D'Arcy Rudnay, a Comcast spokeswoman, declined to comment.

GE rose 8 cents to $16.02 on Monday in New York Stock Exchange composite trading. Philadelphia-based Comcast lost 22 cents to $14.66 on the NASDAQ Stock Market. Vivendi lost 19.5 cents to 19.19 euros in Paris.

The agreement with Vivendi is likely to set the benchmark for a final NBC Universal valuation as Comcast and GE finish their talks, Amobi said. In their discussions, GE and Comcast valued the entertainment unit at about $30 billion, three people said on Nov 9.

On Vivendi's balance sheet, the NBC Universal stake is carried at about 4.3 billion euros ($6.5 billion).

Comcast would initially own 51 percent of the new company, gaining control of NBC Universal's broadcast network, theme parks, movie studio and cable-television channels USA, Bravo, CNBC and MSNBC.

The cable operator would contribute cash and cable networks E! Entertainment, Versus and Golf Channel, people with knowledge of the discussions said in October.

GE exit

GE would have the ability to sell the rest of its stake in phases over several years, people familiar with the plan's details said on Oct 12. The entity would carry about $9 billion in debt and fund the subsequent equity purchases with cash from operations, the people said. Comcast could alternately commit additional cash.

The final price to Comcast may be lowered by a mechanism in the agreement crediting the cable company with some of NBC Universal's cash flow when the deal closes, the Wall Street Journal reported on Monday.

GE has owned NBC since the 1986 acquisition of RCA Corp. Immelt, CEO since September 2001, expanded the unit through the acquisitions of Bravo, Telemundo and the 2004 transaction with Vivendi, which brought theme parks, a movie studio and cable networks.

NBC Universal reported a 27 percent drop in profit for the nine months to September, Fairfield, Connecticut-based GE said on Oct 16.

"It's remarkable that there is an alignment of interests as both NBCU shareholders want to get out of the media business and have an interested third party in Comcast that wants to increase its exposure to these types of assets," said Conor O'Shea, an analyst at Kepler Capital Markets in Paris.

Bloomberg News

(China Daily 12/02/2009 page16)