[Infowarrior] - Comcast Rumored to Buy NBC

[Richard Forno]

"Now that'd be just Comcastic!!!"  *facepalm*

Comcast, GE Said to Discuss NBC Universal Stake Sale (Update2)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8MKvCrGl5hc
By Rachel Layne, Andy Fixmer and Brett Pulley

Oct. 1 (Bloomberg) -- Comcast Corp., the largest U.S. cable network,  
is in talks with General Electric Co. to buy a stake in NBC Universal  
Inc., said three people with knowledge of the discussions.

Negotiations for Comcast to buy about 50 percent of NBC Universal have  
been under way for at least two months and a deal would depend in part  
on Vivendi SA making a decision to sell its 20 percent holding, said  
one of the people, who declined to be identified because the talks are  
private. GE, based in Fairfield, Connecticut, controls 80 percent of  
NBC Universal, owner of the NBC television network, a film studio,  
theme parks, and cable channels including USA Network, CNBC, MSNBC and  
Bravo.

No agreement is certain, the people said.

NBC Universal offers cable content that Comcast Chief Executive  
Officer Brian Roberts has targeted as a priority for future  
acquisitions. GE said in November it had no plans to sell NBC  
Universal. In his letter to shareholders in March, Chief Executive  
Officer Jeffrey Immelt described a “reset” following the financial  
crisis and recession. Analysts value NBC Universal at $21 billion to  
$35 billion including debt.

Jean-Bernard Levy, CEO of Paris-based Vivendi, has described NBC  
Universal as a “non-core” asset and has made acquisitions in other  
businesses. The company has the right to sell its holding and may make  
a decision at an Oct. 14 board meeting, a person with knowledge of the  
situation said on Sept. 21. GE has the right of first refusal.

No Deal

Philadelphia-based Comcast slid 50 cents, or 2.9 percent, to $16.88  
yesterday in Nasdaq Stock Market trading and is little changed this  
year. GE fell 29 cents to $16.42 in New York Stock Exchange composite  
trading, and has gained 1.4 percent this year. Vivendi rose 1 percent  
to 21.36 euros at 9:57 a.m. in Paris, valuing the company at about  
26.3 billion euros ($38.4 billion).

The talks were reported yesterday by the Los Angeles-based Web site  
The Wrap. Comcast denied the Wrap’s later report that a deal had been  
reached to sell NBC Universal for $35 billion. The story cited two  
unidentified individuals who had been informed of the matter.

“While we don’t comment on M&A rumors, the report that Comcast has a  
deal to purchase NBC Universal is inaccurate,” D’Arcy Rudnay, a  
spokeswoman for Philadelphia-based Comcast, said in an e-mail.

Credit Thaw

Gary Sheffer, a spokesman for Fairfield, Connecticut-based GE,  
declined to comment, as did Vivendi spokespeople in Paris and New York.

Media companies including Comcast have used the thawing of credit  
markets to raise money through debt sales. Comcast has $4 billion in  
cash, and the company has said it is interested in adding to cable  
channels that include Golf Channel, E! Entertainment and Style Network.

In 2004, CEO Roberts’ $54.1 billion hostile bid for Walt Disney Co.  
was rejected. Chief Operating Officer Stephen Burke said at a Sept. 9  
investor conference that content companies are Comcast’s first  
acquisition priority. The company isn’t looking to make a $50 billion  
purchase, he said.

Content channels “are really good businesses,” Burke said. “We  
wouldn’t be doing our job if we didn’t try to figure out a way to get  
bigger in those businesses.”

Comcast serves about 25 percent of U.S. cable customers. It reported  
23.9 million video customers as of Aug. 6, down 2.7 percent from a  
year earlier. Revenue growth was 5 percent in the most recent period,  
the smallest in more than three years.

NBC’s Value

Vivendi, owner of the world’s largest music company, may choose to  
sell its stake because NBC Universal isn’t performing as well as the  
company’s majority-owned operations, according to the person who spoke  
on Sept. 21.

The business’s enterprise value may be $21 billion to $23 billion,  
including an estimated $5.1 billion in debt, Sanford C. Bernstein &  
Co. said last month. Stephen Tusa, a JPMorgan Chase analyst, estimated  
NBC Universal’s total value at $30 billion to $35 billion in a Sept. 8  
research note.

NBC Universal posted a 41 percent drop in second- quarter profit on  
lower earnings from broadcast television and its film studio.  
Broadcast revenue slid 9 percent to $1.4 billion, while the cable  
unit’s profit climbed 7 percent on a 3 percent increase in revenue.

Operating profit at New York-based NBC Universal tumbled to $539  
million from $909 million a year earlier, parent GE reported in a July  
17 statement. Revenue at the division, led by Chief Executive Jeff  
Zucker, fell 8.2 percent to $3.57 billion.

Vivendi Pledge

Vivendi has pledged to maintain its dividend and credit rating even as  
it expands into emerging markets through acquisitions. Last month the  
company said it would buy Brazilian telecom operator GVT (Holding) SA  
for about $3 billion.

For the NBC stake sale, “they might wait until the ad market is a bit  
stronger next year,” said Conor O’Shea, an analyst at Kepler Capital  
Markets in Paris. “On the other hand, they’ve got four to five billion  
to find” to cover acquisitions and dividends.

Vivendi obtained the NBC stake with the sale of its media assets to GE  
in 2004. Every year between Nov. 15 and Dec. 10, the Paris-based  
company may notify GE of its intent to sell the shares in the market,  
which could lead to a public offering, according to Vivendi’s annual  
report. That option extends through 2016. GE can preempt an IPO by  
buying the holding, the report says.

GE Rights

GE may use its right of first refusal and buy the stake, Vivendi may  
sell the shares in the public market with the process controlled by  
GE, Vivendi may agree to sell in a private placement to a third party  
or the contract may be restructured for an initial public offering of  
all of NBC, the Sanford C. Bernstein analysts wrote.

“I would assume that from the Vivendi side, they would be very  
interested in finding a deal where they participate in the change of  
control premium,” said Claudio Aspesi, a Bernstein analyst in London.  
“Vivendi don’t want to be seen to sell, and then have GE turn around a  
couple of months later and sell for more.”

Analysts including Citigroup’s Jeffrey Sprague and Sterne Agee & Leach  
Inc.’s Nicholas Heymann have for years called for GE to split off NBC  
Universal, saying it doesn’t fit with the parent company’s other  
divisions.

Immelt Moves

GE’s businesses include the world’s biggest makers of jet engines,  
locomotives and medical imaging machines. Its power- generation  
equipment produces about one-third of the world’s electricity. The  
company is shrinking its GE Capital finance division and boosting its  
investments in what Immelt has labeled infrastructure units. Immelt  
sold the plastics division in 2008 and exited insurance over several  
years this decade.

“GE’s broad technical portfolio positions us as a natural partner as  
the role of government increases in the current crisis,” Immelt, 53,  
wrote in the letter to shareholders. “Over the past decade, we have  
positioned GE to lead in the ‘big themes.’ These include emerging  
market growth, clean energy, and sustainable health care.”

NBC’s cable properties are growing and should be broken off from the  
network, Tusa said in last month’s note.

“This could either be done by GE, or by making the asset more  
attractive for a strategic player who could buy NBCU whole and fund/ 
execute a transaction,” he said.

To contact the reporters on this story: Rachel Layne in Boston at rlayne at bloomberg.net 
; Andy Fixmer in Los Angeles at afixmer at bloomberg.net; Brett Pulley in  
New York at bpulley at bloomberg.net

Last Updated: October 1, 2009 04:50 EDT