Comcast takes control of NBC Universal

Holiday Sale over 400  dealsComcast and General Electric announced today that they have signed a definitive agreement to form a joint venture that will be 51 percent owned by Comcast, 49 percent owned by GE and managed by Comcast. The joint venture, which will consist of the NBC Universal (NBCU) businesses and Comcast’s cable networks, regional sports networks and certain digital properties and certain unconsolidated investments, will be well positioned to compete in an increasingly dynamic and competitive media and digital environment.

The combination of assets creates a leading media and entertainment company with the proven capability to provide some of the world’s most popular entertainment, news and sports content, movies and film libraries to consumers anytime, anywhere. The joint venture will provide consumers the broadest possible access to content, and support high-quality, award-winning content development across all platforms including film, television, and online. It will be anchored by an outstanding portfolio of cable networks and regional sports networks that will account for about 80 percent of its cash flow, including USA, Bravo, Syfy, E!, Versus, CNBC and MSNBC. The joint venture will be financially strong with a robust cash-flow-generation capability.

Under the terms of the transaction, GE will contribute to the joint venture NBCU’s businesses valued at $30 billion, including its cable networks, filmed entertainment, televised entertainment, theme parks, and unconsolidated investments, subject to $9.1 billion in debt to third party lenders. Comcast will contribute its cable networks including E!, Versus and the Golf Channel, its ten regional sports networks, and certain digital media properties, collectively valued at $7.25 billion, and make a payment to GE of approximately $6.5 billion of cash subject to certain adjustments based on various events between signing and closing.

Comcast Chairman and Chief Executive Officer Brian Roberts said in the press release, “This deal is a perfect fit for Comcast and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding. In particular, NBCU’s fast-growing, highly profitable cable networks are a great complement to our industry-leading distribution business. Today’s announced transaction will increase our capabilities in content and cable networks. At the same time, it will enhance consumer choice and accelerate the development of new digital products and services. GE has provided NBCU with a great home and has dramatically and positively transformed the business. We are honored that under this agreement Comcast would take over the stewardship of this important collection of assets and are absolutely committed to investing in NBCU and ensuring that it is a vibrant, financially strong company able to thrive in a rapidly evolving marketplace by delivering innovative programming. We are particularly pleased to be creating this new joint venture with GE and Jeff Immelt and to have their continued involvement.

“For Comcast, this transaction is strategically compelling and will generate attractive financial returns and build shareholder value,” continued Roberts. “It is also expected to be immediately accretive and will also allow us to maintain our strong commitment to returning capital to shareholders– all while increasing the scale, capabilities and value of our cable distribution, content and digital assets. Significantly, it is entirely consistent with our intense focus on value creation and our disciplined strategy of pursuing profitable growth in areas complementary to our distribution business.”

The assets and properties owned or controlled by the new joint venture will include some of the best known brands in the entertainment industry, including:
• Several of television’s most successful cable networks, including USA, Bravo, CNBC, MSNBC, Syfy, E!, Style, Versus and the Golf Channel;
• One of the nation’s largest television groups, including:
  – The NBC Television Network;
  – Local broadcast TV stations in ten top U.S. markets including New York, Los Angeles, Chicago and Philadelphia;
  – The national Telemundo Network and 16 Telemundo O&O stations in locations such as Los Angeles, New York, Miami, Houston, Chicago and Dallas/Ft.Worth;
• Television production operations that produce Emmy Award winning programs like The Office, 30 Rock, Law & Order, Heroes, Saturday Night Live and The Tonight Show, as well as syndicate operations through NBC Universal Domestic and International • Distribution and a 3,000-title library of television episodes;
• NBC News, the leading source of global news and information in the United States with programs such as Nightly News with Brian Williams, Today and Meet the Press;
• A rsports programming lineup featuring the Olympics (through 2012), NBC Sunday Night Football, NHL/Stanley Cup, PGA Tour, US Open, Ryder Cup, Wimbledon and the Kentucky Derby, Versus, Golf Channel and Comcast’s 10 regional sports networks;
• Universal Pictures, which has produced Academy Award winners Atonement, The Bourne Ultimatum, Brokeback Mountain, Ray and A Beautiful Mind, Focus Features, which recently produced Away We Go, and an extensive movie library with more than 4,000 titles through Universal Studios Home Entertainment;
• Digital media properties including CNBC.com, iVillage, NBC.com, Fandango, and Daily Candy, which together generate more than 40 million unique users each month;
• Ownership of theme parks in Florida (50% interest), California (100% interest) and a financial interest in a theme park in Japan;
• A minority interest in A&E, Biography, The History Channel, The Weather Channel, Lifetime and Hulu.com.

GE Chairman and CEO Jeff Immelt said in the press release, “The combination of Comcast’s cable and regional sports networks and digital media properties and NBCU will deliver strong returns for GE shareholders and business partners. NBCU has been a great business for GE over the past two decades. We have generated an average annual return of 11 percent, while expanding into cable, movies, parks and international media. We are reducing our ownership stake from 80 percent to 49 percent of a more valuable entity. By doing so, GE gets a good value for NBCU. This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain. We have many opportunities to invest in our high-technology infrastructure businesses at attractive returns. I believe that the new NBCU will deliver value for both Comcast and GE in the future. We will give consumers and advertisers more choice and our cable and digital assets will be second to none. I am confident Brian Roberts and his team at Comcast will be great partners.”

Comcast also announced the creation of Comcast Entertainment Group (CEG), which will house Comcast’s interest in the joint venture and will stand alongside Comcast Cable, which operates the company’s traditional cable business.

Comcast Chief Operating Officer Steve Burke said in the release, “Both Comcast and NBCU have excellent track records of integrating and growing multi-billion dollar businesses, including significant content acquisitions. In addition, we have both developed some of the country’s most popular programming and built many of the most watched and valued networks in the industry. We are confident that we’ll be even stronger together, and look forward to working with Jeff Zucker and the NBCU team to deliver the best consumer experience.”

Jeff Zucker, current president and CEO of NBCU, will be CEO of the new joint venture and will report to Burke. Zucker said in the release, “Combining the assets of NBCU, ranging from our suite of cable properties and two broadcast networks to a legendary film studio and global theme park business, with the content assets and resources of Comcast, will enable us to continue to thrive in an ever-changing media landscape. Consumers of all of our products – on screens large and small – will have the benefit of enhanced content and experiences, delivered to them in new and better ways as a result of this transaction. This marks the start of a new era for NBCU, and I’m genuinely excited that I will be leading this wonderful organization, along with the Comcast team, at this important time in our history.”

Headquarters for the business will remain in New York. The joint venture board will have three directors nominated by Comcast and two nominated by GE.

Key Elements Of The Transaction:
• NBCU will borrow approximately $9.1 billion from third-party lenders and distribute the cash to GE.
• NBCU, valued at $30 billion, will be contributed to the newly formed joint venture. Comcast will contribute its programming businesses and certain other properties valued at $7.25 billion.
• GE will acquire Vivendi’s 20% interest in NBCU for $5.8 billion. GE will purchase approximately 38% of Vivendi’s interest (or approximately 7.66% of all outstanding NBCU shares) from Vivendi for $2 billion in September 2010, if the Comcast transaction is not closed by then. GE will acquire the remaining 62% of Vivendi’s interest (or approximately 12.34% of all outstanding NBCU shares) for $3.8 billion when the transaction closes.
• Comcast will make a payment to GE of approximately $6.5 billion in cash subject to certain adjustments based on various events between signing and closing.
• The new venture will be 51% owned by Comcast and 49% owned by GE.
• GE expects to realize $9.8 billion pre-tax in cash before debt reduction and transaction fees and after buyout of the Vivendi stake. GE expects to realize approximately $8 billion in cash after paying down the existing NBCU debt and transaction fees.
• GE will be entitled to elect to cause the joint venture to redeem one-half of its interest at year 3 ½ and its remaining interest at year 7. The joint venture’s obligations to complete those purchases will be subject to the venture’s leverage ratio not exceeding 2.75X EBITDA and the venture continuing to hold investment-grade ratings. Comcast also has certain rights to purchase GE’s interest in the venture at specified times. All such transactions would be done at a 20% premium to public market value with 50% sharing of upside above the closing valuation.
• To the extent the joint venture is not required to meet GE’s redemption requests, Comcast will provide a backstop up to a maximum of $2.875 billion for the first redemption and a total backstop of $5.750 billion.
• The transaction has been approved by the Board of Directors of GE and Comcast. It is subject to receipt of various regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act, and approvals of the Federal Communications Commission and certain international agencies. The transaction is also subject to other customary closing conditions. NBCU has obtained $9.85 billion of committed financing through a consortium of banks led by J.P. Morgan, Goldman Sachs, Morgan Stanley, BofA Merrill Lynch and Citi. This financing is expected to receive solid investment-grade ratings from S&P and Moody’s.

Comcast and GE intend to submit regulatory applications supporting the pro-competitive and strong public interest benefits of the transaction, including how the joint venture will better meet the entertainment, communications and information needs of the American public.

“We are prepared to make affirmative commitments to ensure that the pro-consumer and public interest benefits of the transaction are realized,” Roberts said in the press release. “Today, we have announced a number of initial commitments that expand on the capabilities that Comcast and NBCU have built over the years, and the new opportunities that this combination makes possible. These commitments address the needs of various audiences and stakeholders, and we will provide additional details on these and other commitments in our public interest filing with the Federal Communications Commission.”

Sources: Comcast Corp. and General Electric

MacDailyNews Take: Now MSNBC can pimp/whitewash Comcast along with Microsoft. How wonderful.

26 Comments

  1. I’d love to know how this benefits consumers. In my opinion it can only mean bad things. Placing Comcast in charge of anything is a very bad idea. They can’t even create a decent cable box UI. This will end badly.

  2. In a democracy, how can one single company control the media content, the largest cable distribution network and the largest broadcast distribution network?

    We are doomed.

  3. Who does this help? Initially, NBC and GE.

    Although this might be a better fit than the Time Warner/AOL flameout, it pushes NBC one more rung down the ladder and puts more pressure on it to produce in a time when ad revenue is way down.

    Comcast will have to save a lot in retransmission fees to get anything out of it.

    Good luck to them.

    (BTW, new UIs for set-tops should be coming in the next year for most large cable systems)

  4. The transfer happen so that Emelt took crap in the company can, and NBC floated its way down to Comcast. So, now they can repackage and broadcast the shit that NBC cranks out.

    It a lib, sheep farm. They will be gone soon enough.

  5. This ever increasing loss of diversity in media used to be illegal, and still should be. Will Comedy Central’s MTV Network be next?

    You have to think the fear of having Steve Jobs controlling distribution plays a role here. They point to the music industry as a cautionary tale, but draw the wrong conclusion. Steve Jobs didn’t cause their problems, he saved the music industry from piracy and their own inability to grasp the implications of digital media. You can make more money by providing more music at affordable prices, than by trying to pop every listener for $18/album.

    Hilariously NBC, et al, gave up tens of millions of iTunes profits in order to pour money down the black hole at hulu. But they are determined to wring every last penny for content and then cover it with advertising.

    I’m old enough to remember how they sold the idea pay cable tv to the public. You would pay a monthly fee, but not have to watch advertising. Instead we got both.

  6. Having a cable company control a network station is not a good idea.

    There will be a conflict in distribution to other vendors like satellite and other cable companies.

    I agree with the cable box comment. The one we have is over 5 years old. Surely the technology has improved since then.

  7. Vivendi decided to bail out while the getting was good, free TV is dying.

    Cable TV is a joke. They get money from advertisers and viewers PAY to watch the advertisements.

    I have not owned a TV since November of 2008, I’m proud to have filled my viewing needs with iTunes, Netflix and Internet based programming.

    Long live free YouTube!

  8. To see how bad this is for consumers look no further than Comcast’s recent acquisition of Versus and how quickly they strong armed most (all?) NHL games off of the satelite networks…

    I’m a Comcast subscriber…but this “deal” NEVER should be allowed to close!

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