Investment bankers are keeping an eye on John Malone’s Liberty Media as the deadline for Vivendi’s 20 percent put option on NBC Universal draws near.
Vivendi CEO Jean Bernard-Levy signaled last week that his company is likely to exercise its option, forcing NBCU’s parent GE to buy the stake. That could lead to one of three results: a straight reacquisition, an initial public offering or a sale to a third party. The French company can take the action from mid-November to early December.
GE has already said it is unlikely to pay the $5 billion to $7 billion to buy back the stake, which Vivendi acquired in 2004 as part of the merger between Universal and NBC.
While an IPO would give GE the option of spinning off NBCU into a separate publicly traded company, NBCU’s $35 billion valuation could fall once financial transparency is brought to its broadcast network and movie studio.
That opens the door to a third-party acquirer, and while talk has centered on Time Warner or Comcast, sources said the situation is tailor-made for Malone’s “trade up” philosophy.
Strategic buyers often shy away from taking minority stakes in companies because they typically are passive investments that offer no path to control and the financials can’t be consolidated on their balance sheets.
But with Malone there is no such thing as a passive investment.
“Malone’s a hybrid guy,” said one media mergers-and-acquisitions banker. “He operates Liberty with as much of a financial focus as a strategic focus and he looks at deals like a leveraged buyout investor would.”
Indeed, Liberty at one point was close to being classified as a hedge fund instead of an operating company because it owned pieces of so many firms without running any of them.
Plus, Malone is aggressively opportunistic in his practice of building up minority stakes in firms like Time Warner or News Corp., and then swapping the stakes for control of an asset, such as the Atlanta Braves or DirecTV. (News Corp. owns The Post.)
With GE beset by challenges at its finance unit, sources said Malone could grab Vivendi’s minority stake and use it to negotiate for voting rights, a control path or some of NBCU’s assets that could be combined with DirecTV.
“He’d only do it if he can get a position with claws,” said a person familiar with Malone’s thinking, meaning that there would have to be incentives beyond the 20 percent stake built into any deal.
Malone also has a valuable partner in Discovery Communications CEO David Zaslav, who was the No. 3 at NBCU, ran its cable unit and can provide the Liberty boss with unique insight into the company’s finances, operations and culture.
Sources said a few factors could make Vivendi’s stake unpalatable. For example, if a deal couldn’t be done in a tax efficient way, Malone would likely pass.
NBCU’s broadcast network is another drawback given its limited growth prospects and the strict regulations governing it — Malone despises regulators as much as he does taxes.
Malone also is occupied spinning off DirecTV and keeping Sirius XM Radio out of bankruptcy.