French media conglomerate Vivendi Universal has agreed to buy the entertainment assets of USA Networks Inc. for about $12.4 billion in cash, stock and assumed tax liability, a source familiar with the deal said Sunday.
One source said Vivendi’s board approved the deal on Friday, the same day the company said it will buy an 11 percent share of EchoStar Communications Corp., the No. 2 U.S. provider of satellite television.
Meanwhile, USA Network approved the deal late Sunday, according to another source who spoke on condition of anonymity. The companies plan to make an annoucement in the near future, probably on Monday, the sources said.
Under the transaction, Vivendi Universal would pay about $9 billion for the stake it does not already own in USA Networks’ entertainment assets, which include cable channels, the USA Network and a television production unit.
Vivendi Universal would also pay $1.65 billion in cash, and $750 million for USA’s stake in a new joint venture between the two companies. Lastly, the French company would assume a $1 billion tax liability to USA Networks, the source said.
A spokeswoman for USA Networks and a spokesman for Vivendi, which already owns 44 percent of USA Networks, had no comment on the situation.
Under the transaction being discussed, Barry Diller, USA’s chief executive officer, would head a new Vivendi-controlled company that would combine USA’s cable networks, television production unit and film company with Vivendi’s Universal Studios theme parks and movie studio, according to a report in the Los Angeles Times.
The Universal film studio has produced such blockbusters as the “Jurassic Park” movies and “The Mummy”, while USA’s properties include the Sci-Fi Channel and the “Law & Order” television franchise.
Analysts said the deal would be an important acquisition for Vivendi, the world’s second largest media company, by giving it a U.S. distribution outlet for its vast catalog of films, television programs and music.
Vivendi was seeking such a platform to allow it to compete in the United States with other major media companies like The Walt Disney Co. and AOL Time Warner Inc..
In a move to raise cash for the deal, Vivendi last week said it was selling an 8 percent stake in Rupert Murdoch’s UK pay television firm BSkyB for $1.5 billion. Earlier this month, Vivendi also raised more than 1.2 billion euros by selling shares in utility firm Vivendi Environment.
Vivendi CEO Jean-Marie Messier is clearly in deal-making mode. He is also in advanced negotiations to buy Murdoch’s Italian pay-TV operator Stream after an original plan to merge their Italian operators fell foul of regulators.
Talks with U.S. cable king John Malone over some form of European alliance or asset swap have also been rumbling on, sources say. Malone’s Liberty Media owns 21 percent of USA Networks.
Messier has previously discussed the possibility of swapping his 22 percent BSkyB stake for Liberty’s USA Networks stake. After the sale of part of his BSkyB stake to institutional investors, Messier will hold a 14 percent stake in BSkyB.