Universal Music Saga Continues: Other Bidder Says Apple Buyout Could Spoil Other Deals

by , 4:00 PM EDT, April 11th, 2003

The LA Times story that Apple is trying to buy Universal Music has ramifications that go far beyond Apple and the tech industry. The entertainment industry itself has machinations that are every bit as titanic as the struggles between Dell, HP, Oracle, Apple, Microsoft, and the other multibillion dollar competitors in tech. With the music industry struggling in the myopic quagmire its own policies have created in the struggle to control distribution, there is much jockeying of position among the major players involved.

One such major player is Marvin Davis, a billionaire from the oil industry who is making a US$15 billion bid for the entire Vivendi Universal Entertainment division of Vivendi International. Universal Music is the music arm of this division, and according to the LA Times, it is also the apple of Steve Jobs' eye. CBS Marketwatch is now reporting that Marvin Davis is not interested in the rest of the Universal empire if the music aspect of the business is not included. From that article:

"The Davis proposal from the beginning has always been for all the entertainment assets, and the music group is essential," the source said. "The transaction doesn't make sense without it."

The source then added, "If this (the Apple deal) were to happen or if Vivendi was to decide they would keep the music group, the Davis proposal would be withdrawn."

You can find the full article at CBS Marketwatch's Web site.

The Mac Observer Spin:

This little development is what we like to call a shot across the bow. In this particular case, it's a shot across the bow of Vivendi. Mr. Davis is letting it be known, through a leaked source of course, that if Vivendi wishes to unload Universal off onto him, they had better think twice before parting it out to other players.

At the same time, the original story from the LA Times almost assuredly came from a leak from Vivendi, which was its own shot across the bow of either Apple or Marvin Davis that says one or the other needs to pony up to the table if they want to buy some of these assets. At the same time, it could be that Vivendi would like to see a bidding war erupt, but that doesn't seem likely.

We'll throw yet another twist on this idea by saying that the original story could also have been leaked by someone else in the industry, like a Vivendi competitor, who was interested in derailing the entire process. We find it hard to believe that Apple would have wanted this information known, especially considering that any purchase of this nature is going to require some significant, and well-crafted outside financing. Muddying the waters with interest from elsewhere will not help the company achieve that. Certainly Mr. Davis is not going to want to play negotiating and bidding games either.

It's going to be very interesting to see where this goes, if anywhere.

CBS Marketwatch Article