Vivendi’s effort to get rid of its U.S. entertainment assets is being complicated by a potentially large tax payment the company could be forced to pay the Bronfman family, The Post has learned.
While a tussle over tax payments with Barry Diller has been seen as a large roadblock to unwinding the assets, the tax liability owed the Bronfmans could present an even bigger obstacle, sources say.
Depending on how Vivendi gets rid of the entertainment assets, which inclued Universal Pictures, Universal Studios, Universal theme parks and Universal music, the company could be on the hook for a roughly $2 billion payment to the Bronfman family to cover taxes, according to sources close to the situation.
“This is huge, and bigger than [the] Diller [tax controversy],” says one source.
The tax stipulation is a remnant of the 2000 merger of Edgar Bronfman Jr.’s Seagram, the liquor and entertainment company, with Vivendi, which transformed the staid French water company into a global media conglomerate.
The deal ended up being a disaster for both companies. The Bronfman family has lost more than $3 billion as Vivendi shares have slid, while Vivendi is buckling under billions in debt and is seeking to sell assets to buck up its balance sheet.
Jean-Marie Messier, the former Vivendi chief executive who did the Seagram deal, was ousted last July after his furious deal-making brought the company close to bankruptcy.
Messier’s replacement, Jean-Rene Fourtou, has said publicly the company is seeking to sell off its entertainment assets. Key to a deal, sources say, is whether or not the company can structure one that sidesteps the tax liabilities.
Meanwhile, Diller could be owed about $500 million, sources say – not $2 billion, as some have claimed – depending on how the company sells the USA Networks assets, which Vivendi acquired in November 2001 from Diller for about $10.5 billion.
In a separate issue, Diller’s e-commerce company USAI has said in a filing with the Securities and Exchange Commission that Vivendi is trying to skirt an additional $620 million tax payment stemming from the USAI deal. Vivendi has disputed this, and the companies are trying to settle the matter.
A spokesperson for Vivendi Universal Entertainment declined comment.
But sources say Diller, and USAI management, have privately acknowledged that the dispute over the $620 million arose from a drafting error in the documents completing the USA Networks deal, sources say.
But that doesn’t mean Diller is backing off – sources say Diller blames Vivendi for the error in drafting the contract and is thus trying to hold them to the payment.
Meanwhile, Marvin Davis, the billionaire oilman and former owner of 20th Century Fox, and Brian Mulligan, the former chief financial officer of Seagram, are persisting with their efforts at buying VUE. Vivendi’s Paris brass recently met with the pair to consider an offer of between $15 billion and $20 billion. Sources say Vivendi is considering a range of options, which also could include selling the assets piecemeal.