Comcast and NBC Universal: Behold a $37 billion colossus
The media world has just met the new sheriff in town.
Comcast Corp. (CMCSA) Thursday officially announced its long-awaited deal to gain control of NBC Universal from General Electric Co. (GE). The parent company of the NBC television network and Universal Pictures will be run through a joint venture that will be 51% owned by Comcast and 49% owned by GE. Philadelphia-based Comcast will run the business, which will consist of the NBC Universal operations and Comcast's cable networks, regional sports networks and certain digital properties and unconsolidated investments.
Under terms of the complicated transaction, GE will contribute to the joint venture NBCU's businesses valued at $30 billion, subject to $9.1 billion in debt to third-party lenders. Comcast will provide its cable networks including E!, Versus and the Golf Channel, its 10 regional sports networks and certain digital media properties, collectively valued at $7.25 billion. It will also make a payment to GE of approximately $6.5 billion of cash. The deal, which comes five years after Comcast's $54 billion takeover bid for Walt Disney Co. (DIS) fell apart, is subject to the usual government regulatory review.
The deal became finalized on the heels of an agreement GE reached earlier this week to buy out the 20% stake in NBC Universal that French media giant Vivendi owns.
In a press release, Comcast Chief Executive Officer Brian Roberts said the deal would be immediately accretive to earnings. It will also make the world's largest cable company a powerhouse in Hollywood and on Madison Avenue matched by few others. Say an advertiser wants to target men 25 to 54 -- which is how most commercial time is sold.The new venture can sell time on MSNBC, CNBC (NBC Universal) or one of Comcast's regional sports networks. Women can be targeted through E! Entertainment television (Comcast) or Bravo (NBC Universal). Young hipsters can be found on SyFy (NBC Universal) or G4 (Comcast). Add the potential for movie tie-ins with Universal Studios and the potential for cross-promotion is huge.
Ralph Roberts, the founder of Comcast and father of Brian Roberts, is quoted in the New York Times as saying "I've done a lot of deals in my life. Every deal has its time. This is the right time."
To sweeten the pot for shareholders, the cable giant announced plans to boost its dividend by 40%. So far, investors have not been enthused about the deal, sending Comcast shares down more than 11% this year. It wouldn't be surprising if Brian Roberts disposed of the Universal theme parks, which do not seem to be core to his business.
The Times reports that the deal nearly fell apart three times. It will likely face a tough review by antitrust regulators. Activists will also fret over whether Comcast will become too powerful.
Eventually, though, there is little that can prevent the deal from closing.