GE AND VU AGREE TO FORM
NBC UNIVERSAL

NBC owner General Electric and Vivendi Universal have signed a definitive agreement to merge the television network with many VU’s non-music entertainment assets in a new entity to be called NBC Universal. Besides the NBC network, the merged company will include Universal Pictures, NBC Studios and Universal Television, cable networks, Telemundo, the NBC TV stations group, and five theme parks.

GE will pay $3.8 billion in cash for 80 percent of the new company, of which $3.3 billion will go directly to reducing VU’s debt. GE will further assume $1.7 in Vivendi debt, slightly more than was initially expected.

VU will control 20 percent of the new company and have three seats on its 15-seat board. NBC Universal will have $13 billion in annual revenue, with EBITDA of about $3 billion. The merger is expected to generate about $350 million in cost savings and about $100 million in revenue growth.

VU CEO Jean-Rene Fourtou will now negotiate with Barry Diller to free up his seven percent stake in Vivendi Universal Entertainment. Those negotiations are not expected to hold up the GE deal, which is expected to close in the second half of 2004, once regulators get around to approving it.

Fourtou said that the NBCU deal will allow VU to reduce its debt to $5 billion and generate profits by the end of 2004.

The question on many people’s minds now is what VU will do with Universal Music Group, now the French company’s largest entertainment asset. Is anybody besides Edgar Bronfman Jr. in the market for the world’s largest music company?