Lights! Camera! Action!

Buying Universal puts GE in the movie business. Its plan for synergies might make a good screenplay.

Some analysts are less skeptical than others about GE’s synergy claims. Still, the synergy-based savings target set by GE “is an absolutely achievable objective,” analyst Roffman believes. “The company is very secretive, but I know they have a grand plan.”

Using GE’s finance expertise to cut costs in the movie business may not be easy. The current Universal team, headed by Ron Meyer, already gets high marks for cost controls. Universal’s recent financial problems resulted more from “structural issues” under Vivendi, says Wright. The studio has “bounced around among different owners for 10 or more years, [giving Universal] a tarnished look.” Analyzed on their own, though, he says, Universal’s operations “look pretty good to us.” (Some suggest that GE, lacking its own production experience, might have to hire new management talent.)

As for more-draconian cost controls, other studio owners—starting with Disney in the 1980s—have tried in vain to fix a system that routinely includes paying stars up to $20 million per picture. So analysts wish GE good luck. “The creative talent,” says Roffman, “always seems to win out.”

Roy Harris is senior editor at CFO.

The Price of Admission
What some have paid to buy media companies.
Acquirer/Target
Announced
Price
(in $ billions)
EBITDA Multiple
GE / Universal
10/03
14
14
Liberty Media / QVC
7/03
7.9
13.9
GE (NBC) / Bravo
11/02
1.25
27
Vivendi / USA Networks
12/01
10.3
17.9
GE (NBC) / Telemundo
10/01
2.7
45
Disney / FOX Family
6/01
5.3
31.2
Vivendi / Seagram (Universal)
6/00
34
22.6
Viacom / CBS
9/99
35
21.9
Westinghouse / CBS
8/95
5.4
14.9
Disney / Capital Cities-ABC
7/95
19
12.1
Seagram / MCA (Universal)
4/95
5.7
13.4
Viacom / Paramount
6/94
10
20.2
Average Multiple = 18.6

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