Familiarity Breeds Support for Bronfman’s Vivendi Bid

As the French stewards at Vivendi Universal sift through bids this week for the conglomerate’s U.S. entertainment assets, Universal executives are quietly rooting for a surprise 11th-hour entrant in the sweepstakes: their old boss Edgar Bronfman Jr.

Bronfman’s bid to reclaim the businesses that his family once owned is being embraced by many of his former colleagues in Los Angeles and New York as the best alternative in a competitive field of prospective buyers who largely are unknown to them.

Few ever could have predicted such a welcome mat for Bronfman.

He had a rocky tenure as former head of the Universal entertainment operations, and some of his management decisions were widely derided. What’s more, Bronfman had a testy relationship with Hollywood, which he once famously ridiculed as a “dumb town.� In turn, the establishment labeled him a dilettante.

Many Vivendi investors remain bitter that it was Bronfman who joined forces with former Chief Executive Jean-Marie Messier to create Vivendi Universal in 2000, marrying an old-line European water utility with a glitzy entertainment giant. The acquisition spree that followed would ultimately send the stock price into a tailspin -- along with the Bronfman family fortune -- and contribute to the current decision to unwind the venture.

Still, many Universal executives (who declined to be identified because of strict instructions from Vivendi to avoid taking sides in the contest for Universal) say they support Bronfman for a simple reason: They are already familiar with him. Because he had a hand in putting many of Universal’s current managers in place, Bronfman is viewed as the least likely to bring wholesale change to a group that has seen three owners since 1991.

“We are rooting for Edgar Bronfman as the devil we know,� one executive said.

Since he announced his unexpected bid for the Universal movie studio, theme parks, television assets and music unit last month, Bronfman has received numerous phone calls and e-mails of encouragement from his former employees, who credit him with elevating Universal’s stature, sources said. During a visit to the Universal City lot this month, several staffers, including a security guard, urged him on.

Bronfman, 48, declined to comment. But his spokesman, Tod Hullin, said the executive “has great respect and affection for these people and is hopeful he will be able to work with them again.�

A Universal spokeswoman said the company and its executives would not comment on individual bidders.

According to sources inside and outside of Vivendi, support for the soft-spoken and reserved Vivendi vice chairman extends to Universal’s top brass, notably the successful and well-liked Universal Studios head, Ron Meyer, and the powerful and independent-minded music chief, Doug Morris. Both executives were hired by Bronfman when he was chief of Seagram Co., which owned the Universal operations.

Morris had been Time Warner’s music chief until he was fired in 1995. Bronfman resuscitated Morris’ career by hiring him to oversee Universal’s sprawling music operation. The same year, he plucked Meyer, former president of the talent representatives Creative Artists Agency, to head the studio.

Bronfman’s backers say his management moves led to dramatic turnarounds in the movie and music operations.

Under the stewardship of Meyer and Universal Pictures Chairwoman Stacey Snider, the studio has enjoyed a string of box-office successes in the last four years, including “The Mummy,� “The Fast and the Furious,� “American Pie� and, more recently, “8 Mile� and “Bruce Almighty.�

On the music front, Bronfman’s 1998 acquisition of PolyGram Music for $10.4 billion created the world’s largest music company. With Morris at the helm, Universal has in its stable such industry superstars as U2, Eminem, Sting and 50 Cent.

During his tenure, Bronfman launched an aggressive expansion of the theme park group. He built on the success of Universal’s parks in Los Angeles and Orlando by adding a second Florida theme park called Islands of Adventure in 1999 and opening its first park in Japan in 2001.

“There’s a lot of support for Edgar,� said Robin Richards, the former head of Vivendi’s U.S. Internet operations, citing the success of the studio, music operation and theme parks. “Edgar assembled that talent.�

But the biggest deal Bronfman assembled -- the $34-billion merger that created Vivendi Universal -- still haunts him and many shareholders.

The transaction produced disastrous results for investors, especially the Bronfmans, who remain Vivendi’s largest shareholders. Universal executives deeply resented that the studio’s accomplishments were overshadowed by the financial crisis that gripped the company last year and sent their stock options into a tailspin.

“We’re in this state because of him,� said one executive who is wary of a possible return by Bronfman.

Even before the merger, and despite his notable successes, there also were missteps.

The grandson of Samuel Bronfman, founder of the Seagram whiskey empire, Edgar Bronfman was viewed with skepticism when he arrived on the entertainment scene in 1995. That’s when Seagram paid $5.7 billion to buy a controlling interest in MCA Inc., former owner of Universal, from Japan’s

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Matsushita Electric Industrial.

Some of his management decisions backfired, and a multimillion-dollar “re-engineering� effort aimed at creating more efficiencies at the studio was perceived by some as a waste of money.

He also was widely criticized for his decision to sell a controlling interest in Universal’s television assets to media mogul Barry Diller’s USA Networks Inc. That was viewed as shortsighted because TV provides an important distribution outlet for the studio’s movies. Vivendi conceded as much last year, when it bought back the television businesses -- paying more than twice the price Bronfman had sold them for.

Bronfman has maintained that Vivendi was a victim of Messier’s grandiose ambitions, and he helped oust Messier from the board last year. In an interview last month, Bronfman said that “Universal was a badly broken studio when I took it over; it was the leading studio when I left. I would say the same about the music business.�

Determined to reclaim the businesses he once ran, Bronfman submitted an estimated $15-billion bid last week for Universal assets, with the financial backing of private equity firms Blackstone Group and Thomas H. Lee Co.

Under the proposal, Cablevision Systems Corp. would become a strategic partner, merging its cable channels, which include American Movie Classics, We: Women’s Entertainment and Independent Film Channel, with Universal’s lucrative USA and Sci Fi cable channels to create a privately held company in which Vivendi would hold a stake.

Bronfman faces plenty of competition from an array of impressive and powerful suitors.

John Malone’s Liberty Media Corp. is viewed by many insiders as a front-runner because he sits on a huge stockpile of cash. Last week, Malone decided to widen his bid to include Universal Music Group.

An investment group headed by former 20th Century Fox owner Marvin Davis has put in a bid for the entire Universal group, while Metro-Goldwyn-Mayer Inc. has offered to buy the movie studio and TV properties. Vivendi executives are also very interested in pursuing talks with NBC about a possible merger of assets, while Viacom Inc. is expected to join in a second round of bidding to make a play for Universal’s cable assets and possibly Universal Television.

Still, Bronfman’s overall appeal to staffers could be an important factor to the board as it weighs offers over the coming weeks, company insiders say. Vivendi wants to keep a minority stake, probably about 30% of the entertainment group, in the hopes that Vivendi’s beleaguered investors can recoup some of the huge losses over time.

For that reason, directors are interested not only in the amount of cash that bidders are offering but also in how well the players can work with the current management team, said a source close to the Vivendi board.

That could give Bronfman an advantage.

“He certainly has to have a cast iron stomach and an enormous appetite,� said Marty Kaplan, associate dean of USC’s Annenberg School for Communication.

“This town is not kind, and to want to walk back in the arena suggests maybe a certain desire to change the story about him, Kaplan said. “This gives him a shot at writing a happy ending.�