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Comcast/ NBCU Talking Joint Venture Deal?

Comcast may not be near a $35 billion deal to purchase all of NBC Universal, but the Philadelphia-based MSO is in the early stages of hammering out a less costly transaction that would give it a controlling interest in the broadcasting and cable conglomerate, according to reports.
Earlier Thursday, Comcast denied a published report that it was nearing a deal to buy NBC Universal outright for an estimated $35 billion, but did not deny it was in negotiations with the media giant. While Comcast is still declining to comment on negotiations, sources familiar with the situation said the cable company is eyeing a deal that would give it a 51% interest in NBCU for what appears to be a bargain price -- $10 billion to $12 billion.
Sources confirmed a report earlier Thursday by CNBC that Comcast was in the early stages of negotiations in a transaction that would give it a 51% interest in NBCU in exchange for $4 billion to $6 billion in cash and its cable networks like E! Entertainment Television, Golf Channel, Versus, Style and several regional sports channels, valued at about $6 billion. NBC would retain a 49% interest in the combined programming giant and would also contribute about $12 billion in debt, according to CNBC.

According to sources familiar with the negotiations, the deal is in its very early stages and could fall apart. In addition, any transaction is predicated on Vivendi, which owns a 20% stake in NBCU, selling its interest back to NBC parent General Electric. Vivendi has the right every November to put back its interest in NBCU to the company, sell it to a third party or force an initial public offering of the 20% stake.
A deal would appear to benefit Comcast the most -- it would gain a controlling interest in established cable networks like USA, Syfy, Bravo, a movie studio, theme parks, television stations and a broadcast television network for near fire-sale prices. NBC purchased its 80% of Vivendi Universal Entertainment from Vivendi in 2003 for about $14 billion in cash and stock.

Combined with the NBC broadcast network, the newly created NBC Universal was valued at about $44 billion. According to Sanford Bernstein cable and satellite analyst Craig Moffett, NBCU is currently valued at between $21 billion and $23 billion.
In a research note, Wells Fargo Securities media analyst Marci Ryvicker wrote that an NBC deal would be good for Comcast on the cable network side, but no so much for NBCU's other assets.
"While the investment community frowns upon large deals, even ones that could be accretive (given that content margins are significantly greater than distribution margins), in our view an acquisition of NBCU makes sense as it relates to the cable networks," Ryvicker wrote. "But the other assets -- broadcast network, the O&O stations and the theme park units do not."
And she added that while buying a 51% stake could be more palatable to investors than being on the hook for $20 billion to $35 billion, "the fact that there is 'billion' after any number is likely to spook investors -- especially ones that have become more interested in cable's free cash flow story."
Comcast shares, down as much as 7.6% ($1.29 each) earlier in the day, closed at $15.67, down 7.2% or $1.21 per share. GE shares were down 2.7% (45 cents) to $15.97 each.