Vivendi appears likely to sell its 20 percent stake in General Electric's NBC Universal this year, paving the way for a possible initial public offering of the studio in 2010, sources told the New York Times on Friday.
General Electric executives now believe Europe's largest media and entertainment conglomerate will decide to unload its stake in NBC Universal later this year, and are discussing various options including a spinoff, the newspaper cited people briefed on the matter as saying.
Analysts have for years called on GE -- which has repeatedly said it wanted to remain in the entertainment business -- to consider spinning off or selling NBC Universal, which they view as incompatible with its other industrial divisions and a drag on resources and overall performance.
Other analysts say the broadcast and cable operator generates ample amounts of cash and is thus a valuable asset in a weak economy.
If Vivendi decides to sell its stake in NBC Universal, a company valued by Wall Street at up to $35 billion according to the Times, the deal would be this year's biggest media deal.
NBC Universal and General Electric representatives declined to comment on the report.
GE is now discussing its options with the help of investment bankers at JPMorgan Chase, including buying Vivendi's stake, finding a new investor for the stake, or proceeding with an IPO, the Times said.
But the Times cited an anonymous GE executive as saying that bringing in a new investor for the stake, which the executive valued at $7 billion, was unlikely.
Under the terms of a 2004 agreement, Vivendi has the right, from mid-November to early December up till 2016, to sell its stake to GE or sell it as part of an initial public offering.
A decision to sell would trigger a provision allowing GE to buy out Vivendi.
Analysts say media deals are set to accelerate as companies in the industry forge new alliances or seek partners to compete against online media.
In August, the Walt Disney Co announced plans to buy Marvel Entertainment for $4 billion, and Vivendi itself has been on a shopping spree with a $2.9 billion offer for Brazil's GVT Holdings.
Vivendi Chief Executive Jean-Bernard Levy this week described the company's stake in NBC Universal as non-core but said Vivendi has not decided whether to exercise the option, and will not announce its decision until November.
GE Chief Executive Jeffrey Immelt has repeatedly stated the company has no plans to sell its 80 percent stake in NBC Universal.
(Reporting by Gina Keating; Editing by Gary Hill)