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For a guy who says he's not interested in owning a movie studio, former Hollywood mogul Barry Diller seems intent on proving otherwise. On Mar. 19, the chairman of electronic retailer USA Interactive (USAI
) resigned as chairman and chief executive of Vivendi Universal Entertainment, or VUE, which is the Hollywood unit of French parent Vivendi Universal (V
). That immediately prompted speculation that the onetime head of the Fox and Paramount studios was preparing a bid for VUE.
Not so, according to Diller, who says he had "no ambitions" to buy the studio. But he allows that, with USA owning a 5.4% stake in VUE, "if there is some opportunity which translates these assets into a greater value, we'll look at it."
Several sources close to the man himself say Diller is very much interested in buying VUE -- only he doesn't think he can get it. As a result, Diller doesn't want to be outmaneuvered, as he was in 1994, when Viacom (VIA
) Chairman Sumner Redstone outbid Diller's QVC shopping channel to buy Paramount Communications. So, Diller is in -- sort of, it seems.
PACKAGE DEAL. The conventional wisdom is that Diller is allied with cable baron John Malone and his Liberty Media (L
), which would help bankroll a bid for the Vivendi assets that which Diller would then run. But scores of other potential bidders are around, although only one, Los Angeles financier Marvin Davis, is so far announced.
With former Universal Studio President Brian Mulligan orchestrating his bid, Davis, who owned Twentieth Century Fox in the early '80s, would offer around $15 billion for a 60% stake in the entire company, which includes Universal's film studio as well as its theme parks, music company, and its USA, Sci-Fi, and other cable channels. Davis, who has backing from Texas financier David Bonderman and investment bankers at Carlyle Group, has met at least twice with Vivendi Chairman Jean-Rene Fourtou. Since then, Davis and Mulligan have been mostly on hold while the French contemplate their next move.
And that move could be very interesting indeed. Sources close to Vivendi say the French company recently gave its internal numbers for the entertainment unit to Redstone, Diller's old nemesis. Redstone's Viacom already owns MTV, Black Entertainment, and the The National Network cable channels, and he wants to buy Vivendi's cable channels as well and is willing to bid as much as $8 billion for them.
IN THE CIRCUIT. Viacom may also make a bid to buy the Universal film studio, which appears to be worth around $3 billion, and then merge it with its own Paramount studio, slashing overhead while hanging onto its large film library. Redstone has no interest in the Universal theme parks in Orlando, Los Angeles, Spain, and Japan, and would either leave them or buy them and turn around and sell them to the merchant bank Blackstone Group, which already owns a 50% stake in the theme-park units. Redstone would most likely be forced to jettison the music unit so that competing labels would continue to provide music videos to MTV.
Then there's General Electric (GE
), which only recently has emerged as a serious bidder for some of the Vivendi assets. GE, which last year bought the Bravo Channel and earlier acquired the Telemundo Hispanic TV network, wants to add to its arsenal of TV properties and is said to covet Vivendi's USA, SciFi, and Trio channels. GE's NBC unit would also love to have control over the profitable Law & Order franchise, which Universal produces for the Peacock network.
One problem, though. According to insiders, GE doesn't like the volatility of the studio business and, like Redstone, doesn't want the theme parks or music company. Then there are Rupert Murdoch's News Corp. (NWS
) and MGM (MGM
), both of which wouldn't mind the cable channels and would likely also bid on the studios and merge them with their own film operations to reduce overhead.
STAR POWER. Diller of course knows he would have a lot of likely competition for Vivendi's choice assets. "One thing Diller doesn't like to do is engage in a bidding war," says one longtime associate. "Barry likes to steal assets, and there isn't much to steal in this particular game." True enough -- Vivendi is still smarting over the clock-cleaning that Diller administered to then-Vivendi Chairman Jean-Marie Messier, selling him the USA and other cable channels for $11 billion in a deal that today would be lucky to fetch $8 billion.
So is Diller speaking plainly when he says he's leaving what he once called his "night job" -- overseeing Vivendi -- so that he can devote his full attention to USA Interactive? Could be. Perhaps it's only a coincidence, but the same day Diller resigned from Vivendi, USAI also announced a $3.3 billion deal to buy the remaining 46% of the travel site Expedia (EXPE
) that it didn't already own. Diller says he would be happy just to make USAI an electronic retailing powerhouse.
Why not? His 40.9 million shares of that company are worth nearly $1.1 billion. But that's money. The glamour is about Hollywood. And so's the chase. For Barry Diller, both seem to have endless appeal.
By Ronald Grover in Los Angeles. Follow his weekly Power Lunch column, only on BusinessWeek Online Edited by Patricia O'Connell
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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