NEW YORK (CNN/Money) -
General Electric's NBC unit won the bidding for Vivendi Universal's U.S. entertainment assets Tuesday with a multibillion-dollar merger offer that would create one of the world's largest media companies.
Shares of Vivendi (V: up $1.15 to $18.05, Research, Estimates) jumped 4.1 percent to 16.60 in Paris and more than 7 percent to $18.11 in New York, where markets had been shut Monday for Labor Day.
General Electric (GE: up $0.83 to $30.40, Research, Estimates) shares gained more than 1 percent in midday trading in New York.
The NBC deal would combine assets including Vivendi's Universal Pictures, the Hollywood studio behind "The Hulk" and "The Mummy," and cable television network USA, with GE's NBC network and CNBC and Bravo cable channels.
"Together we have developed a plan to create an exceptional media company that would rank among the most profitable in the U.S.," said Vivendi Chairman and CEO Jean-Rene Fourtou.
|NBC's Bob Wright will lead the combined company.
As part of the agreement, Vivendi said shareholders of Vivendi Universal Entertainment would receive $3.8 billion of "cash consideration" against a commitment by General Electric to issue its stock as well as a $1.6 billion debt reduction. General Electric has an option to buy Vivendi's 20 percent stake in the combined company starting in 2008.
Vivendi, the world's second-biggest media company, said after a board meeting that General Electric would own 80 percent of the merged company and Vivendi would own 20 percent while holding three seats on the combined company's board.
The preliminary financial structure values the combined media assets at $45 billion, with Vivendi's 20 percent stake valued at $9 billion, a source close to the situation told CNNfn. The source did not know where the company would be based or if there is a break-up fee attached to the merger agreement.
Combined with the $3.8 billion cash consideration and $1.6 billion in debt NBC will assume, the deal is valued at $14.4 billion for Vivendi, CNNfn reported.
Bob Wright, vice chairman of General Electric, NBC's parent company, and chairman and CEO of NBC, would lead the new company.
Vivendi added that it does not anticipate that European regulators will object to the NBC offer and it expects the merger to be completed by the end of the month.
The Paris-based company also said it sees the merger boosting its earnings per share beginning in 2004.
After eleventh-hour talks with two contenders, Vivendi held a special board meeting in Paris where it voted to eliminate a consortium led by Edgar Bronfman Jr. and approve the preliminary merger deal with NBC.
"Edgar Bronfman is bewildered," a person close to the auction told Reuters. "But there was little hope of swaying Vivendi today."
Following the Vivendi statement, Bronfman released a written statement, saying, "Now that VU's board has decided to enter into exclusive negotiations with GE/NBC, I am hopeful that VU's strategic direction will reward its employees and shareholders for their patient and steadfast support."
NBC has long been Vivendi's favored choice since proposing a merger to create a media firm potentially worth more than $40 billion that would vie with U.S. heavyweights including Walt Disney Co. (DIS: up $0.43 to $20.93, Research, Estimates), Viacom (VIA: up $0.66 to $45.65, Research, Estimates), and AOL Time Warner (AOL: Research, Estimates), the parent company of CNN/Money.
Vivendi's decision brings an end to a long summer of negotiations that gripped the media industry and ran up huge bills for an army of advisers as some of Hollywood's biggest egos jostled for the firm's assets.
Vivendi said Citigroup and Goldman Sachs & Co. will serve as its financial advisers and General Electric will use Credit Suisse First Boston and AGM Partners.
-- from staff and wire reports