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Comcast, G.E. Announce Deal on NBCU

With the formal announcement Dec. 3 that Comcast has taken a
controlling 51% stake in NBC Universal in a new joint venture with General
Electric, the regional cable systems operator emerged as a media powerhouse
with an enviable range of assets in distribution and content, not just in the U.S. but around
the globe.

The deal will change the way people watch TV since Comcast is pushing forward
with interactive viewing on traditional TV sets and now has a much bigger hand
in how online video is consumed.

As expected, NBC Universal President/CEO
Jeff Zucker will lead the new joint venture as CEO,
reporting to Comcast Chief Operating Officer Steve Burke.

Comcast also announced the formation of Comcast Entertainment Group, which will
house Comcast's interest in the joint venture apart from the company's cable

The rationale of today's deal to partner with GE for NBC Universal is primarily
about cable channel content. Cable is one part of the media business that has
proved largely recession-proof due its dual-revenue stream of advertising and
fees paid to owners by distributors.

Speaking on CNBC this morning
Comcast CEO Brian Roberts said,
"Cable programming channels are the best part of the media business...82 %
of the new NBCU will be cable programming channels.... This gives us scale in

Discussing the company name, NBC Universal, Roberts pointed out it was the
other parts of the company that had driven growth, rather than NBC or
Universal. Roberts, however, stressed that the new partners would find ways to
grow the broadcast business, too, pointing to Burke's credentials in broadcast

The press release announcing the deal details the unusual lengths to which the
new combined entity will go to satisfy Washington,
D.C., regulators. The commitments
include continuing free over-the-air television through NBC and Telemundo;
extending a commitment that NBC's news outlets and public affairs shows stay
free from interference from the new owners; the preservation of local news; and
an expanded commitment to children's programming and diversity of programming.

The release said 75% of the firm's video-on-demand output will be without
charge and that the company will extend key components of program access rules
to negotiations on retransmission consent. The partners have also committed to
carrying new independently owned channels on Comcast's digital line-up, and
will honor all of NBCU's collective bargaining agreements. 

Within minutes of Comcast's announcement, another statement arrived from
interest group Free Press, which wants to scuttle the deal. The group believes
the deal raises serious anti-trust issues.

"The pundits who are predicting this merger will be a cakewalk haven't
done careful analysis of the damage it will do to the competitive fabric of the
video marketplace," said Mark Cooper, research director for the Consumer
Federation of America. "This merger's potential to foreclose competition
and stifle real innovation is significant and real."

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
  • GE will be entitled to elect
    to cause the joint venture to redeem one-half of its interest at year 3
    1/2 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 $5.75 billion.