GE appears ready to hand over control of NBC Universal to Comcast

GE appears ready to hand over control of NBC Universal to Comcast
Comcast to pool cash, cable channels into new firm that would control 51 percent stake; GE to contribute NBC Universal, own
By Meg James and Ben Fritz
Copyright © 2009, Chicago Tribune
October 3, 2009
http://www.chicagotribune.com/business/chi-sat-comcast-nbc-1003oct03,0,5727052.story


After two decades as owner of one of America's storied broadcasters and five years operating a fabled movie studio, General Electric Co. appears ready to exit show business.

The industrial giant, maker of jet engines and wind turbines, is in talks with cable TV leader Comcast Corp. to take over management of NBC Universal. Under terms of the deal, Comcast would pool cash and its cable channels into a new company that it would control with a 51 percent stake. GE would contribute NBC Universal and own 49 percent.

Comcast's cable TV systems, which serve nearly one of every five of the nation's TV households, would not be part of the entity.

Such a transaction would thrust Philadelphia-based Comcast into the same league as Time Warner Inc., Walt Disney Co. and News Corp. It also would continue consolidation in the entertainment business, following Disney's deal this summer to buy comic book publisher Marvel Entertainment Inc. for $4 billion.

For its part, Time Warner said Friday that it wasn't interested in making a bid for NBC Universal.

After years of telling investors it was happy in the entertainment business, GE's hand is being forced by the French conglomerate Vivendi SA.

Vivendi owns 20 percent of NBC Universal and must decide in the next two months whether it wants to sell its stake for at least $4 billion or hold on to its interest. If Vivendi decides it wants out, GE, whose financial services businesses have been hit hard in the collapse of the capital and real estate markets, would have to come up with a mountain of cash or find a new investor.

Enter Comcast. The family-run public cable company has been eager to become a bigger player in the industry. Owning movies, TV shows and networks would help Comcast fill its cable pipelines, video-on-demand services and emerging Internet video business.

Comcast would welcome such a portfolio at a time when growth is slowing at its Internet and phone businesses, competition is heating up among TV providers and fees it pays to programmers like NBC are rising.

"If electronic distribution is the key to the future, Comcast wants to make sure they have a central role in the distribution of movies and TV online through video on demand, and this should help in that regard," said Christopher Marangi, an analyst with Gabelli & Co., a Comcast shareholder.

Six years ago, Comcast considered making a bid for the Universal film studio, theme parks and cable channels that were then solely owned by Vivendi. But GE prevailed and combined its NBC properties with the Universal holdings. The following year, Comcast made a run at Walt Disney Co. before investors signaled their disapproval.

This time may be different. Unlike the $54 billion Comcast would have had to shell out to snare Disney, combining with NBC Universal would come comparatively cheap.

"We estimate that all of NBC Universal is worth $20 billion to $25 billion," Laura Martin, a media analyst with Soleil Securities, said in a report Thursday. "We don't expect Comcast to have much competition for the asset, so the price might be inexpensive."

NBC Universal this year has been beset by problems: a shortage of scripted shows for NBC's prime time; a risky decision to shift Jay Leno's late-night talk show into prime time that is starting to look shaky; a string of box-office flops at the studio; and a recession that has clobbered advertising revenue at NBC's once-cash-gushing TV stations.

Inside NBC, executives have spent the past six weeks putting together five-year forecasts of their business units for what they thought was going to be a public offering of Vivendi's 20 percent stake. Most had no idea that at headquarters in Manhattan, top executives were negotiating a deal that would give Comcast control of the network and studio.

What Comcast, NBC bring to table

Comcast
Headquarters: Philadelphia
Chief executive: Brian Roberts
Founded: 1963
Ownership: Public
Business: Cable TV, Internet and digital phone services
Cable channels: E!, Style, Golf Channel, G4, Versus

NBC Universal
Headquarters: New York City
Chief Executive: Jeff Zucker
History: Formed in 2004 through the merger of NBC and Vivendi Universal Entertainment
Ownership: General Electric 80 percent, Vivendi 20 percent
Key businesses: NBC, Telemundo, Universal Studios, Universal theme parks
Cable channels: More than 10, including CNBC, MSNBC, Bravo, USA Network, Syfy, Oxygen

SOURCES: Company reports, Tribune Newspapers

Richard Verrier, Dawn Chmielewski and Joe Flint of Tribune Newspapers contributed to this report. mjames5@tribune.com