NBC, UNIVERSAL TO JOIN MERGER COMBINES TV, MOVIE ASSETS INTO $43 BILLION FIRM.

Byline: Greg Hernandez Staff Writer

General Electric and Vivendi Universal signed a deal Wednesday that merges their considerable entertainment assets into a single, $43 billion media empire called NBC Universal.

This newly formed show business powerhouse puts the NBC television network - GE's broadcast subsidiary - and the Universal Pictures movie studio in the position to pool their distribution and programming assets for greater profit and greater competitiveness, executives said.

NBC Universal will also include such cable channels as USA, Sci-Fi Channel, Bravo, MSNBC and CNBC, the ``Law & Order'' franchise and other shows, five theme parks, a 5,000-title film library and the Telemundo Spanish-language television network.

The company will be led by Bob Wright, vice chairman at GE and chairman and CEO of NBC, which has headquarters in Burbank and New York. Wright called Wednesday's agreement ``a significant milestone'' that sets the stage for substantial long-term growth.

``The combination of GE's and Vivendi Universal's respective media assets into a dynamic new company considerably strengthens our capabilities as a content provider and packager,'' Wright said.

The final deal, virtually unchanged from when it was outlined several weeks ago, puts NBC Universal on a more equal footing with such conglomerates as Viacom Inc. and The Walt Disney Co. with combined movie and television studios and broadcast and cable distribution.

Still, NBC Universal's projected $14 billion in annual revenues makes it small compared with the annual revenues of the two largest conglomerates, AOL Time Warner ($41 billion) and Disney ($25 billion). Overall, the merged company ranks as the world's sixth-largest media conglomerate.

The company is aiming for as much as a 10 percent revenue growth as a result of the merger, said GE Chairman Jeffrey Immelt.

``With this merger, NBC will stay in the forefront of the fundamental changes taking place in television and other media,'' Immelt said. ``The new NBC Universal will have the assets, the management team and the operating focus to prosper in a digital world and enhance value for GE and Vivendi Universal shareholders.''

GE will control 80 percent of NBC Universal and pay Vivendi Universal Entertainment shareholders $3.8 billion in cash. The deal is expected to close during the first or second quarter of next year at which time GE will issue common stock to fund the cash part of the transaction.

Universal Music Group, the world's largest music company, is not a part of the merger and is being kept by Vivendi.

Paris-based Vivendi, which has been selling assets to cut down on its massive debt, will retain a 20 percent stake in NBC Universal but the company could sell that interest down the line.

Vivendi Universal Chairman and CEO Jean-Rene Fourtou hailed the agreement Wednesday as ``a very good deal'' for shareholders in large part because it will significantly lower Vivendi's debt.

``By the end of next year, Vivendi Universal will be a profitable company with a low level of debt and our teams will be motivated by the new prospects of growth,'' Fourtou said.

Under the terms of the deal, NBC Universal will assume $1.7 billion of debt. The companies have identified $400 million to $500 million in potential synergies including both cost savings and revenue growth.

The deal has already had a positive impact on Wall Street with Standard & Poor and Moody's Investor Service saying they will likely raise Vivendi Universal's corporate credit ratings.

UCLA media expert George Geis said one of the biggest advantages the deal gives NBC Universal is a clear path between program content and distribution.

``Anytime you have a concentration of content as well as distribution, you change the dynamics of the market,'' said Geis. ``There is this vertical integration that can reset negotiations in the marketplace.''

NBC President Jeffrey Zucker said Wednesday that the merger of such diverse entertainment assets makes something like a crime channel possible since it could center on the ratings powerhouse ``Law & Order'' franchise, which is produced by Universal.

The combined libraries comprise more than 32,000 television episodes in all, ranging from ``Law & Order'' to such older shows as ``The Rockford Files,'' ``The Virginian'' and ``Leave it to Beaver.''

Another cable possibility, Zucker said, is a channel that features only Universal films, which could include several generations of classic films like ``To Kill a Mockingbird,'' ``Jaws,'' ``Jurassic Park'' and ``E.T. - The Extra-Terrestrial.''

``Certainly with what's in the Universal library, we'll be looking at different possibilities,'' Zucker said. ``That library gives us an opportunity to try many different platforms, creating more choices for viewers down the road.''

Geis doesn't believe, however, that it would be in the company's best interests for NBC to automatically look to Vivendi properties for its content and vice versa.

``They still need to find the best distribution deal for their content,'' he said.

GE stock closed Wednesday at $30.20 per share, a drop of 2 percent on the New York Stock Exchange, while Vivendi Universal dropped by 0.4 percent to close at $19.17 per share.

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com

CAPTION(S):

2 photos, 2 boxes

Photo:

(1) Randy Falco, left, president of NBC Television; Bob Wright, center, chairman of NBC; and Jeff Zucker, president of NBC Entertainment; announce a merger with Vivendi Universal.

Bebeto Matthews/Associated Press

(2 -- color) NEW ENTERTAINMENT GIANT (photo montage)

Box:

(1) NEW ENTERTAINMENT GIANT

(2) BY THE NUMBERS

Sources: NBC/Universal

Jon Gerung/Staff Artist