reached a definitive agreement under which it will merge NBC with
The terms call for GE to pay shareholders of the Vivendi assets $3.8 billion in cash and assume $1.7 billion of Vivendi debt. GE will also transfer back to Vivendi 20% of the merged unit's ownership, a stake worth in the neighborhood of $7 billion to $9 billion, which Vivendi is allowed to start selling in three years.
The pact ends months of negotiations over the sale of the unit, which includes the Universal movie studio, the USA, Sci-Fi and Trio cable networks and some theme parks.
General Electric Vice Chairman Bob Wright will lead the new unit, which is called NBC Universal. On a pro forma basis, the new company is projected to have 2003 revenues of more than $13 billion and earnings before interest, taxes, depreciation and amortization of nearly $3 billion.
Vivendi Universal currently owns 86% of Vivendi Universal Entertainment and will receive $3.3 billion of cash at the close. Beginning in 2006, Vivendi Universal will have the option to begin selling its ownership interest at fair market value. The companies also say they've found $400 million to $500 million in potential synergies, including both cost savings and revenue growth. Vivendi Universal will hold three out of 15 seats on the board of directors of NBC Universal.
Another big shareholder in Vivendi Universal Entertainment is Barry Diller's
. Vivendi executives reportedly said on a conference call that they expected to reach a deal to buy out Diller's stake in the next six to eight months, though nothing was certain.
Vivendi said the deal will help cut its debt to below 5 billion euros by the end of next year. NBC officials said they expect the deal to close in the first or second quarter of 2004.