Billionaire Davis Wants To Be In The Picture at Universal
The Nation
Billionaire Davis Wants to Be in the Picture at Universal
November 22, 2002|Richard Verrier and Claudia Eller | Times Staff Writers
Billionaire Marvin Davis says he is not just kicking the tires.
Only hours after Paris-based Vivendi Universal said it rebuffed his initial $13-billion offer, the onetime owner of 20th Century Fox Film Corp. said he was determined to pursue Universal's entertainment empire, including its studios, theme parks and recording company.
Davis on Thursday was clearly relishing the limelight, even though some privately questioned whether he was seriously interested in the Vivendi properties or just doing what has become his M.O. of sorts -- sniffing around potential ventures, stirring up headlines and then abruptly walking away.
At Spago in Beverly Hills, Davis sat at his regular table in his custom-made oversize armchair, lunching on gazpacho with former Universal Pictures co-Chairman Brian Mulligan, the man considered the architect behind the takeover proposal. As Davis coyly dodged questions about his plans for Vivendi--"I'll let you know" -- one fellow diner and well-wisher was former President Bill Clinton, who circled back through the eatery for a handshake and chitchat at Davis' table.
Davis and his associates dismissed those who are dismissing him as a non-player, saying that the $13-billion deal he pitched for a majority stake in the entertainment assets was a negotiator's starting point. The 77-year-old oilman-turned-deal-maker called it a "full and fair" offer and said he planned to meet with Vivendi executives in January to begin more earnest discussions."
Marvin's a great entrepreneur. He simply wants to be a mogul again," said Viacom Inc. Chairman Sumner Redstone, who considers Davis a close friend. Redstone said he believed Davis' bid for Universal was serious."
But his desire for action will not lead him to do something that's not economically sound," Redstone said.
Vivendi's U.S.-traded shares jumped $2.28, or 20%, to close at $14 on the New York Stock Exchange as investors were encouraged by Davis' show of interest, which analysts said could attract other potential suitors.
The offer, said Christopher Dixon, media analyst at UBS Warburg, "underscores the extraordinary value of Universal's portfolio of entertainment."
It all complicates Chief Executive Jean-Rene Fourtou's carefully calibrated plans to restructure Vivendi's U.S. entertainment assets.
Just last week, Vivendi announced that Fourtou would help current entertainment chief Barry Diller oversee a reorganized Universal group. If Vivendi formally rejects Davis' bid, sources said, Fourtou would face greater pressure to expedite plans to spin off the entertainment assets and take them public.
Those in Davis' camp said it was in Vivendi's interest to deal now, rather than wait months for the rewards of an initial public offering. A deal now could infuse billions of dollars in the company as it tries to dig out from its massive debt.
The proposal caused some to question whether there was a personal agenda behind it. "Rivals" might be the nicest way to describe the relationship between Davis and Diller. The two clashed after Davis hired Diller at Fox in the 1980s.
Diller now divides his time between running Vivendi's U.S. entertainment assets and his main job as head of USA Interactive Inc., a sprawling e-commerce business that includes Ticketmaster and online travel service Expedia Inc.
In making his pitch, Davis has noted that many investors question whether Diller can handle the responsibilities of both jobs. He has contended that the company deserves a full-time executive focused exclusively on Vivendi, a source close to Davis said."
That's the opening he saw," the source said.
Observers noted that Davis' statement made no mention of Diller and said that under his proposal Mulligan would play a "leading role at the company."
It is uncertain, though, whether Diller could stand in the way of Davis' bid.
Diller has considerable leverage in the future of the entertainment assets because of a host of restrictions he negotiated when he sold USA's film and television properties to Vivendi this year. For example, Vivendi could be forced to pay Diller's USA Interactive as much as $2 billion in tax liabilities should certain assets be sold.
But the source close to Davis is not convinced that the contract is airtight."
Barry is very good at presenting the picture he'd like to present," he said, adding: "He'll get what's coming to him."
New details of the proposed deal emerged Thursday as the beleaguered French media giant confirmed that its management had met with representatives of the Davis group this month to discuss the proposal but had told the representatives that a sale of Vivendi's entertainment assets "was not on the agenda."
Although they did not elaborate, company sources said Vivendi management believed the offer was well below what the businesses are worth. Davis values the overall group at about $20 billion and has offered $13 billion to buy about a 65% stake in the assets. That offer consists of $7 billion in debt, $4 billion in cash and $2 billion in preferred stock, sources said.
Vivendi, however, believes the group is worth closer to $35 billion, and some industry analysts place it at $26 billion.
Price isn't the only sticking point. Vivendi's new management team is not eager to relinquish control of the U.S. entertainment businesses, even as other parts of the struggling media empire are being auctioned off to pare $19 billion in debt.
The offer comes as Fourtou has been working assiduously to restore investor confidence in Vivendi, which nearly collapsed last summer and faces criminal probes in the United States and France on allegations that the company under then-CEO Jean-Marie Messier misled investors about its financial crisis.
Messier spent billions trying to transform a water utility into a rival to AOL Time Warner through a series of media deals, including the 2000 acquisition of Seagram Co. and its Universal properties.
The unsolicited bid puts pressure on Fourtou and Diller to present an alternative plan to shareholders. Both men are said to be preparing a spinoff."
This is a company that is still evolving in terms of strategy," said Michael Nathanson, an analyst with Sanford C. Bernstein & Co. "They are still thinking all this through, and so they're not inclined to do anything right away until they figure out what they are going to be."
Sources close to Davis say he believes he can buy the assets at a relatively good price, cut costs, stabilize management and take the company public in about three years.
Some executives also doubt the seriousness of the offer given Davis' reputation as a corporate "tire kicker" whose list of failed acquisition targets includes CBS, United Airlines and Northwest Airlines.
But sources close to Davis say he is serious and boasts a consortium of buyers. Deutsche Bank is helping finance the deal, they said."
We believe our proposal provides full and fair value for the assets and VU's response has been positive," Davis said in his statement.
Davis earned his billions in part by leveraging a string of savvy oil and real estate deals in Denver into a glamorous Hollywood lifestyle that once included owning the 20th Century Fox studio -- and then selling it for a $350-million profit.
At a 1986 dinner, Davis said of the entertainment business: "I love this stuff, the people and the glamour. This isn't just a business. It's a lot of fun."
*
Times staff writers James Bates, Sallie Hofmeister, Meg James and Joel Sappell contributed to this report.
