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Comcast to take over NBCU in $30bn deal

04 декабря 2009

Comcast agreed to take majority-ownership of NBC Universal from General Electric Corp. in a complex deal valued at about $30 billion, ending the conglomerate's more than two-decade rule over the peacock network and satisfying the cable giant's push to own more content.

Meanwhile, in a move designed to soothe concerns among its shareholders about the risks of a major media acquisition, Comcast announced a 40% dividend increase and said it will complete its $3.6 billion stock-buyback effort during the next three years.

Paving the way for the deal, GE reached an agreement with NBCU's minority owner, Vivendi S.A., to buy its 20% stake in the entertainment company for $5.8 billion after GE Chief Executive Jeff Immelt traveled to Paris last week for negotiations with Vivendi Chief Executive Jean-Bernard Levy.

Combining Comcast - the nation's largest cable operator and third-largest phone service provider - with a major media and entertainment conglomerate that owns cable and broadcast TV networks, a major film studio and a theme parks business threatens to further shake up a media industry already reeling from the rise of digital media.

The deal is now expected to come under heavy scrutiny from consumer groups and lawmakers in a regulatory approval process that could take over a year and add burdens to the venture's prospects. Sen. Herb Kohl (D., Wis.), who chairs a Senate subcommittee that examines antitrust issues, said he plans to hold hearings to review the deal.

"We believe this is an approvable transaction," Comcast Chief Executive Brian Roberts said on a conference call following the announcement."There will be a thorough review - that is obviously appropriate. There will be conditions, but we do not foresee, nor would we want to proceed, if they had a material effect on the company, and we don't anticipate that occurring."

Comcast laid out steps to address regulatory concerns, including a commitment to keep the broadcast-affiliate model.

"We also take very seriously the responsibilities that come with being one of the most important news providers in the country as well as an owner of free-over-air broadcast networks," Roberts said.

Under the deal's terms, NBCU will borrow $9.1 billion to give to GE, which will pay $2 billion for 38% of Vivendi's NBCU stake if the joint venture's completion hasn't occurred by September. Comcast will pay GE nearly $6.5 billion and contribute programming valued at $7.25 billion for a 51% stake in the venture.

NBCU Chief Executive Jeff Zucker will stay at the helm of the new venture, reporting to Comcast Chief Operating Officer Stephen Burke.

In trading Thursday, GE shares added 0.9% to $16.22, while Comcast gained 7% to $15.96.

The deal's complex structure has more to do with tax benefits and addressing the reluctance of Comcast's shareholders to pony up cash or stock for all of NBC. GE retains a minority stake in NBC Universal, but most expect GE to wind down its position entirely over time, leaving Comcast to own the entertainment empire in full.

GE will be able to force the purchase of half its 49% stake in the venture 3 1/2 years after closing and the rest at year seven. Comcast also has some rights to purchase GE's stake at "specified times." Any deals would be done at a 20% premium to the public market value.

Comcast hailed the agreement as a deal to form a new generation of media and entertainment conglomerate that can bolster its cable business and thrive amid the dizzying pace of technological change in communications wrought by the Internet, which has mired the industry in a painful slowdown.

Roberts said the deal will generate "double-digit returns" to shareholders, even before any cost synergies are realized. He said the deal will enable Comcast to more aggressively pursue business opportunities like interactive TV advertising and new digital distribution models for movies and TV shows.

Roberts said Comcast is buying into NBCU at a "cyclical low point" for the industry, and he expects the economic recovery to provide a boost to its slower lines of business. As for future acquisitions, Roberts said,"With this transaction, I believe our company is strategically complete."

For his part, GE CEO Immelt said the deal will generate about $8 billion in cash to his company at closing - a sum that will help the industrial conglomerate deal with the ongoing turmoil in its finance business and invest in high-technology infrastructure businesses. After generating an average annual rate of return of 11% through its 80% stake in NBCU, he said the company is getting "good value" by reducing its ownership to 49% of a "more valuable entity."

GE shareholders have long voiced concerns about the company's media business, saying it doesn't fit in with its broader portfolio of industrial and finance businesses. Meanwhile, traditional media has suffered a long decline as business models have been upended by the rapid and chaotic rise of the Internet and digital communications.

Comcast has highlighted NBCU's cable networks, which include USA, CNBC and NBC, as the deal's main attraction. Cable networks have held up better during the recent downturn because they enjoy a dual revenue stream through subscriber fees paid by pay-TV operators and delivering advertisers to targeted audiences.

The cable giant sees the NBC purchase adding content to its current business model that is 95% distribution. While the cable industry's subscription model has held well, its growth has slowed and analysts say the rise of Internet video could undermine its business model if consumers begin to forego pay-TV in favor of an Internet-only subscription.

NBC's cable success contrasts with the suffering at its broadcast network and local TV stations as ratings decline and the ad market slumps. The network trails the competition in ratings, and it faces a number of strategic programming and investment decisions over the next year while it waits for its new owner to take the reins, including bidding for the rights to Olympic games and forming a programming lineup for the next TV season that can lift its ratings.

During the regulatory process, Roberts said GE will remain in control of NBCU, and it will continue to operate the business as it sees fit.

"There's an opportunity to confer with us about major decisions, but the business is going to be run by" NBCU CEO Zucker and GE CEO Immelt, Roberts said."[GE is a] great partner and we have a lot of confidence that our agenda is aligned."

GE was advised on the deal by J.P. Morgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. Comcast was advised by Morgan Stanley and UBS AG and BofA Merrill Lynch. Barclays Capital advised Vivendi.

Источник: telecoms.com

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