Vivendi said it had entered exclusive talks with NBC over the formation of a new business which could be worth more than $40bn.

The new firm would combine NBC's broadcast network and cable television channels and Vivendi's entertainment assets, which include Universal Studios.

General Electric's chairman Jeff Immelt said the new firm would be "a global leader in the media industry".

Vivendi had been considering two offers for its entertainment business, but decided not to accept the bid from an investor group led by Edgar Bronfman, the former Seagram chief executive.

Bid saga

The battle to win control of Vivendi's entertainment assets had run all summer, with an original short-list of six suitors gradually being whittled down.

We have developed a plan to create an exceptional media company Jean-Rene Fourtou, Vivendi Universal

Some observers had suggested that Vivendi might choose Mr Bronfman's offer as it would give the firm more cash up front with which to reduce its vast debt pile.

Originally, Vivendi had been hoping to raise $14bn for the Universal assets to cut the debts run up by former chief executive Jean-Marie Messier.

Under the terms of the NBC deal, Vivendi will receive $3.8bn up front and also see its debt cut by $1.6bn.

The new company will be 80% owned by General Electric and 20% owned by Vivendi.

Good fit

Vivendi said the new company would have revenues of $13bn in 2003.

WHAT THE NEW FIRM WILL OWN NBC television network A number of cable networks including USA Network, Sci-Fi Channel, CNBC and Bravo Universal Pictures Universal Television

"We have developed a plan to create an exceptional media company, which would rank among the most profitable in the US," said Vivendi Universal chairman Jean-Rene Fourtou.

The new entity will be headed by Bob Wright, who is currently vice chairman of General Electric and NBC's chairman and chief executive.

"The assets of NBC and Vivendi Universal Entertainment (VUE) are extremely complementary," Mr Wright said in a statement.

"The combination of VUE's rich content library, superior television production facility, and attractive cable brands with NBC's industry-leading broadcast network and well-established cable properties could benefit shareholders for year to come."