Comcast To Buy Controlling Interest in NBC from GE

SKY NEWS:  Comcast is putting up more than £8bn in cash assets to buy 51% of NBC Universal from General Electric.  GE will retain 49% of the company, having struck a deal earlier this week to buy the 20% owned by French company Vivendi.  The deal brings together Comcast’s extensive US cable TV, phone and broadband network and NBC’s broadcast network and the Universal film studio and theme parks.

NBC’s network includes Spanish-language Telemundo and channels such as CNBC, The Weather Channel and Bravo.  The move gives Comcast – the largest US cable service provider – control of films and programmes it can deliver to audiences via TV, web or mobile devices.

But the acquisition has its critics, with some calling it the most foolhardy media deal since AOL’s ill-fated marriage to Time Warner in 2001.  There are suggestions there is too little overlap between the businesses to result in significant savings, while competition regulators are likely to impose restrictions.  But Comcast, owner of E! Entertainment, says there will be benefits for consumers.  For example, Universal movies could reach cable television sooner after their cinema releases and television shows could be quicker to appear on mobile phones and other devices.

PHILADELPHIA —  In agreeing to buy 51 percent of NBC Universal from General Electric Co., which has controlled NBC since 1986, Comcast hopes to succeed in marrying distribution and content in a way Time Warner Inc. could not. AOL and Time Warner are undoing their ill-fated marriage Dec. 9. Time Warner has already shed its cable TV operations.

Meanwhile, GE needs cash to support its financing unit, GE Capital, which was devastated in last year’s financial meltdown.

Under the deal, expected to close in a year if regulators and shareholders of both companies approve, GE would buy Vivendi SA’s 20 percent stake in NBC Universal for $5.8 billion. Of that, $2 billion is payable in September 2010 if the deal hasn’t closed by then, and the remaining $3.8 billion would be due at closing. NBC Universal is to be separated into a new joint venture.

Comcast would buy a 51 percent stake of the new company by paying $6.5 billion in cash and contributing $7.25 billion worth of cable channels it owns, including E!, Style and Golf Channel. Moody’s analyst Neil Begley noted that Comcast is jumping in as media company values are relatively low and stands to benefit as business conditions improve.

GE would retain a 49 percent stake, with the option of unloading half its stake in 3 1/2 years and all of it in seven years. The new company or Comcast could buy out GE. The new NBC Universal would borrow $9.1 billion that would partially go toward covering the money GE owes Vivendi.

Comcast would get to name three people to the board and GE two, and Comcast would manage the joint venture. Jeff Zucker would remain NBC Universal’s CEO and report to Comcast Chief Operating Officer Steve Burke. NBC Universal’s headquarters are expected to stay in New York.

The Comcast-NBC deal is widely seen as a test of the Obama administration’s resolve to fight media consolidation, but consumer groups aren’t confident regulators will find a legal means to block the transaction.

Comcast would likely have to agree to some restrictions, such as treating rival cable, satellite TV and phone companies equally in programming talks instead of favoring its own cable operations.

Shareholders haven’t been happy, either, at what they see as a renewed attempt at empire building after Comcast’s failed $54 billion hostile bid for Disney in 2004.

Many investors sold off the stock at the first whiff of a possible deal with GE, afraid that Comcast would make an acquisition it couldn’t handle and tie up money for dividends and stock buybacks that could boost Comcast’s shares. Shares in Comcast have fallen 11 percent, vaporizing about $5 billion in market value, since word of the deal leaked Sept. 30.