Positions Comcast and NBCU to Lead the Next Phase of Media Industry’s Evolution
Builds on Diverse Cable Portfolio, Accelerates Digital Offerings and Expands Customer Choice
Entity Will Deliver Strong Cash Flow With Conservative Capital Structure
NBCU Businesses Valued at $30 Billion, Comcast to Contribute Businesses Valued at $7.25 Billion
Comcast To Own 51%, GE 49% Interest in NBCU
Jeff Zucker to Lead New York-based Venture
PHILADELPHIA, PA and FAIRFIELD, CT – Dec. 3, 2009 – Comcast (NASDAQ: CMCSA, CMCSK) and General Electric (NYSE: GE) announced today that they have signed a definitive agreement to form a joint venture that will be 51 percent owned by Comcast, 49 percent owned by GE and managed by Comcast. The joint venture, which will consist of the NBC Universal (NBCU) businesses and Comcast’s cable networks, regional sports networks and certain digital properties and certain unconsolidated investments, will be well positioned to compete in an increasingly dynamic and competitive media and digital environment.
The combination of assets creates a leading media and entertainment company with the proven capability to provide some of the world’s most popular entertainment, news and sports content, movies and film libraries to consumers anytime, anywhere. The joint venture will provide consumers the broadest possible access to content, and support high-quality, award-winning content development across all platforms including film, television, and online. It will be anchored by an outstanding portfolio of cable networks and regional sports networks that will account for about 80 percent of its cash flow, including USA, Bravo, Syfy, E!, Versus, CNBC and MSNBC. The joint venture will be financially strong with a robust cash-flow-generation capability.
Under the terms of the transaction, GE will contribute to the joint venture NBCU’s businesses valued at $30 billion, including its cable networks, filmed entertainment, televised entertainment, theme parks, and unconsolidated investments, subject to $9.1 billion in debt to third party lenders. Comcast will contribute its cable networks including E!, Versus and the Golf Channel, its ten regional sports networks, and certain digital media properties, collectively valued at $7.25 billion, and make a payment to GE of approximately $6.5 billion of cash subject to certain adjustments based on various events between signing and closing.
Comcast Chairman and Chief Executive Officer Brian Roberts said, “This deal is a perfect fit for Comcast and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding. In particular, NBCU’s fast-growing, highly profitable cable networks are a great complement to our industry-leading distribution business. Today’s announced transaction will increase our capabilities in content and cable networks. At the same time, it will enhance consumer choice and accelerate the development of new digital products and services. GE has provided NBCU with a great home and has dramatically and positively transformed the business. We are honored that under this agreement Comcast would take over the stewardship of this important collection of assets and are absolutely committed to investing in NBCU and ensuring that it is a vibrant, financially strong company able to thrive in a rapidly evolving marketplace by delivering innovative programming. We are particularly pleased to be creating this new joint venture with GE and Jeff Immelt and to have their continued involvement.
“For Comcast, this transaction is strategically compelling and will generate attractive financial returns and build shareholder value,” continued Roberts. “It is also expected to be immediately accretive and will also allow us to maintain our strong commitment to returning capital to shareholders– all while increasing the scale, capabilities and value of our cable distribution, content and digital assets. Significantly, it is entirely consistent with our intense focus on value creation and our disciplined strategy of pursuing profitable growth in areas complementary to our distribution business.”
GE Chairman and CEO Jeff Immelt said, “The combination of Comcast’s cable and regional sports networks and digital media properties and NBCU will deliver strong returns for GE shareholders and business partners. NBCU has been a great business for GE over the past two decades. We have generated an average annual return of 11 percent, while expanding into cable, movies, parks and international media. We are reducing our ownership stake from 80 percent to 49 percent of a more valuable entity. By doing so, GE gets a good value for NBCU. This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain. We have many opportunities to invest in our high-technology infrastructure businesses at attractive returns. I believe that the new NBCU will deliver value for both Comcast and GE in the future. We will give consumers and advertisers more choice and our cable and digital assets will be second to none. I am confident Brian Roberts and his team at Comcast will be great partners.”
Comcast also announced the creation of Comcast Entertainment Group (CEG), which will house Comcast’s interest in the joint venture and will stand alongside Comcast Cable, which operates the company’s traditional cable business.
Comcast Chief Operating Officer Steve Burke said, "Both Comcast and NBCU have excellent track records of integrating and growing multi-billion dollar businesses, including significant content acquisitions. In addition, we have both developed some of the country’s most popular programming and built many of the most watched and valued networks in the industry. We are confident that we’ll be even stronger together, and look forward to working with Jeff Zucker and the NBCU team to deliver the best consumer experience.”
Jeff Zucker, current president and CEO of NBCU, will be CEO of the new joint venture and will report to Burke. Zucker said, “Combining the assets of NBCU, ranging from our suite of cable properties and two broadcast networks to a legendary film studio and global theme park business, with the content assets and resources of Comcast, will enable us to continue to thrive in an ever-changing media landscape. Consumers of all of our products – on screens large and small – will have the benefit of enhanced content and experiences, delivered to them in new and better ways as a result of this transaction. This marks the start of a new era for NBCU, and I'm genuinely excited that I will be leading this wonderful organization, along with the Comcast team, at this important time in our history.”
Headquarters for the business will remain in New York. The joint venture board will have three directors nominated by Comcast and two nominated by GE.
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 fees.
- GE will be entitled to elect to cause the joint venture to redeem one-half of its interest at year 3 ½ 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 $5.750 billion.
The transaction has been approved by the Board of Directors of GE and Comcast. It is subject to receipt of various regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act, and approvals of the Federal Communications Commission and certain international agencies. The transaction is also subject to other customary closing conditions. NBCU has obtained $9.85 billion of committed financing through a consortium of banks led by J.P. Morgan, Goldman Sachs, Morgan Stanley, BofA Merrill Lynch and Citi. This financing is expected to receive solid investment-grade ratings from S&P and Moody’s.
Comcast and GE intend to submit regulatory applications supporting the pro-competitive and strong public interest benefits of the transaction, including how the joint venture will better meet the entertainment, communications and information needs of the American public.
“We are prepared to make affirmative commitments to ensure that the pro-consumer and public interest benefits of the transaction are realized,” Roberts said. “Today, we have announced a number of initial commitments that expand on the capabilities that Comcast and NBCU have built over the years, and the new opportunities that this combination makes possible. These commitments address the needs of various audiences and stakeholders, and we will provide additional details on these and other commitments in our public interest filing with the Federal Communications Commission.”
Advisors
Morgan Stanley is lead financial advisor to Comcast with UBS and BofA Merrill Lynch acting as co-advisors. Davis Polk & Wardwell LLP is Comcast’s legal advisor. J.P. Morgan is lead financial advisor to GE with Goldman Sachs and Citi acting as co-advisors. Weil, Gotshal & Manges LLP is GE’s and NBCU’s legal advisor.
Teleconference and Webcast
Comcast will host a conference call with the financial community today, December 3, 2009, at 8:30 a.m. Eastern Time (ET) to discuss this morning’s announcement with Comcast Chairman and CEO Brian L. Roberts, Comcast Chief Operating Officer Stephen B. Burke and Comcast Chief Financial Officer, Michael J. Angelakis. The conference call will be broadcast live via the Company’s Investor Relations website at www.cmcsa.com or www.cmcsk.com. Those parties interested in participating via telephone should dial (800) 263- 8495 with the conference ID number 44380493. A telephone replay of the call will be available on the Investor Relations website starting at 12:30 p.m. Eastern Time on December 3, 2009 and will be available until December 8, 2009 at midnight Eastern Time. To access the rebroadcast, please dial (800) 642-1687 conference ID 44380493.
GE will also host a webcast with the financial community today, December 3, 2009, at 8:30 a.m. Eastern Time / 7:30 a.m. Central Time to discuss this morning’s announcement with GE Chairman and CEO Jeff Immelt, GE Chief Financial Officer Keith Sherin and NBCU President and CEO Jeff Zucker. The webcast will be available at www.ge.com/investors. A replay will be available later in the day on the site.
Additional media materials are available at www.ge.com/newnbcu, www.comcast.com/nbcutransaction and https://www.nbcumv.com/mv/.
The description of this transaction included in this press release is qualified in its entirety by, and is subject to, the terms of the definitive documentation for the transaction to be filed by Comcast with the Securities and Exchange Commission on a Current Report on Form 8-K.
About GE
GE (NYSE: GE) is a diversified infrastructure, finance and media company taking on the world’s toughest challenges. From aircraft engines and power generation to financial services, medical imaging, and television programming, GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.
About Comcast Corporation
Comcast Corporation (Nasdaq: CMCSA, CMCSK) (www.comcast.com) is one of the nation's leading providers of entertainment, information and communication products and services. With 23.8 million cable customers, 15.7 million high-speed Internet customers, and 7.4 million Comcast Digital Voice customers, Comcast is principally involved in the development, management and operation of cable systems and in the delivery of programming content.
Comcast's content networks and investments include E! Entertainment Television, Style Network, Golf Channel, VERSUS, G4, PBS KIDS Sprout, TV One, ten sports networks operated by Comcast Sports Group and Comcast Interactive Media, which develops and operates Comcast's Internet businesses, including Comcast.net (www.comcast.net). Comcast also has a majority ownership in Comcast-Spectacor, whose major holdings include the Philadelphia Flyers NHL hockey team, the Philadelphia 76ers NBA Basketball team and two large multipurpose arenas in Philadelphia.
About NBC Universal:
NBC Universal is one of the world’s leading media and entertainment companies in the development, production, and marketing of entertainment, news, and information to a global audience. NBC Universal owns and operates a valuable portfolio of news and entertainment networks, a premier motion picture company, significant television production operations, a leading television stations group, and world-renowned theme parks. NBC Universal is 80% owned by General Electric and 20% owned by Vivendi.
Combined Assets/Properties
The assets and properties owned or controlled by the new joint venture will include some of the best known brands in the entertainment industry, including:
- Several of television’s most successful cable networks, including USA, Bravo, CNBC, MSNBC, Syfy, E!, Style, Versus and the Golf Channel;
- One of the nation's largest television groups, including:
- The NBC Television Network;
- Local broadcast TV stations in ten top U.S. markets including New York, Los Angeles, Chicago and Philadelphia;
- The national Telemundo Network and 16 Telemundo O&O stations in locations such as Los Angeles, New York, Miami, Houston, Chicago and Dallas/Ft.Worth;
- Preeminent television production operations that produce Emmy Award winning programs like The Office, 30 Rock, Law & Order, Heroes, Saturday Night Live and The Tonight Show, as well as syndicate operations through NBC Universal Domestic and International Distribution and a 3,000-title library of television episodes;
- NBC News, the leading source of global news and information in the United States with top-rated programs such as Nightly News with Brian Williams, Today and Meet the Press;
- A robust sports programming lineup featuring the Olympics (through 2012), NBC Sunday Night Football, NHL/Stanley Cup, PGA Tour, US Open, Ryder Cup, Wimbledon and the Kentucky Derby, Versus, Golf Channel and Comcast’s 10 regional sports networks;
- Universal Pictures, which has produced Academy Award winners Atonement, The Bourne Ultimatum, Brokeback Mountain, Ray and A Beautiful Mind, Focus Features, which recently produced Away We Go, and an extensive movie library with more than 4,000 titles through Universal Studios Home Entertainment;
- Fast growing digital media properties including CNBC.com, iVillage, NBC.com, Fandango, and Daily Candy, which together generate more than 40 million unique users each month;
- Ownership of theme parks in Florida (50% interest), California (100% interest) and a financial interest in a theme park in Japan;
- A minority interest in A&E, Biography, The History Channel, The Weather Channel, Lifetime and Hulu.com.
Caution Concerning Forward-Looking Statements
This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These statements are made on the basis of the views and assumptions of management. Particular uncertainties that could cause actual results to be materially different than those expressed in these forward-looking statements include: the timing of, or ability to obtain, necessary regulatory and governmental approvals on acceptable terms; the timing and completion of the financing of NBC Universal on contemplated terms before the closing of the proposed joint venture; the receipt of an investment grade rating from the rating agencies of the proposed joint venture between GE and Comcast; adverse developments in the business and operations of NBC Universal, including potential disruption that may make it more difficult to maintain business and operational relationships; and the successful combination, operation and overall performance of the joint venture post closing. For GE, an additional uncertainty includes its ability to redeploy its capital into high-growth technology businesses. For Comcast and NBC Universal, additional uncertainties include the ability to integrate the programming assets of Comcast and NBC Universal in the new joint venture; the ability of the new joint venture to create popular programming, to develop new digital products and services, and to succeed in the highly competitive media industry; the ability of the new joint venture to generate attractive financial returns and strong cash flows; and, the effect of any conditions that regulators may impose in permitting the transaction to proceed. These uncertainties may cause actual future results to be materially different than those expressed in these forward-looking statements. None of GE, Comcast nor NBC Universal undertake to update these forward-looking statements.
Okay, I’ll bite: Does this mean Leno will now be forced to become a Comcast subscriber?
Jeff Zucker to lead the Venture?!? I hope Comcast has the say in NBC’s Prime time Lineup next fall, and not the crazy people who put the shows that are on now. I like NBC, but its their prime time I don’t like, I think a huge percent of TV viewers would agree.
I wonder what this means for NBC as a broadcast network? This also may not be good for consumers and the news business. Perhaps this will help get NBC out of it’s ratings slump. I hear that Jeff Zucker will report to Steve Burke. Personally, I think Zucker should be fired because he Zucks at his job. But, at least he’ll be reporting to Steve Burke, who from what I hear is very intelligent. I just hope that either Comcast forces The Jay Leno Show off the air or move him over to USA. Jay Lenos show is niche and might work on USA.
However, the Federal Communications Commission needs to look and see at any anti-trust implications this deal might have on DirecTV, or Time Warner Cable. The last thing the United States needs is less competition. Comcast would probably have to agree to some concessions. We have more channels with fewer owners today than we did 20 years ago. Yes, in the old days you had fewer networks, but you also had fewer owners who were required by the FCC to serve the public interest.
Anyway, I see several scenarios if this merger is approved. 1. NBC gets back to better programming and better ratings. 2. The programming gets better but the ratings get worse and NBC is converted into a cable network. If you’re a showrunner, there are certain advantages of cable over broadcast. Cable can be more edgy and isn’t afraid to take more risks as broadcast is. Either way, this merger or joint venture, could put the NBC brand, “Back in the Saddle Again.”
To be completely frank, from just scanning this release and listening to the various industry related gossip and rumour I’m not convinced that Comcast is all that interested in NBC, my gut instinct is that their policy when it comes to network television won’t be dramatically different from the current policy – manage for the bottom line. The main focus of this merger going forward appears to be expanding the cable portfolio (which would further explain USA’s mid season schedule) and pushing forward with bigger on demand and other digital projects all of which makes sense from a Comcast perspective.
People that won’t Leno gone from prime time need to stop turning their attention to this deal and hoping Comcast will get rid of him I just don’t think they will. Those that won’t Leno removed from prime time need to look to Gaspin and ask whether he has the guts and/or power to remove the profitable entity that is The Jay Leno Show from prime time and replace it with a slate of 10PM dramas that will more than likely lose money. It’ll also be worth asking if he has the cash to do it and I think its unlikely that he’ll have enough money to launch five new (or four if you move SVU back to 10PM) dramas at 10 along with filling the holes in the rest of the schedule.
Like it or not I fully expect Leno to still be in prime time next season, I think the absolute best anyone who doesn’t want him there can hope for is that he isn’t on five nights a week. It isn’t out of the realms of possibility that Leno will be cut down to three episodes a week, perhaps making way for SVU to return to 10PM and a new drama to debut on Thursday night but I won’t be holding my breath on that option.
With that said this merger is so much bigger than Leno and the future of NBC, personally I’m more interested to see how this effects the NBCU cable networks more than anything else.
Maybe Burke will really run NBC instead of Zucker. Or, perhaps Zucker will learn from Burke. I have feeling that Burke will be more involved than Jeff Immelt was with the tv operations. So, Jeff while remaining the head of NBC Universal, will finally have to really report to someone else who is around more often than Immelt.
EDIT – Wow, I typed won’t instead of want at least twice there. How stupid do I feel right now…
What role does Gaspin have in all of this? Personally, it would be a good business decision to convert NBC into a cable network like they’ve been talking about doing.
Perhaps this is a stupid question but what does this mean for Friday Night Lights? NBC has a deal with DirecTV and since they are Comcast’s competition how exactly does that play out?
I’m more interested in the cross-over potential:
USA, Bravo, CNBC, MSNBC, Syfy, E!, Style, Versus, and the Golf Channel … minority interest in A&E, Biography, The History Channel, The Weather Channel, Lifetime, and Hulu
Olympics on Versus. Seacrest on NBC?
Does this mean that you can get NBC free with Comcast service?
Don’t be surprised if one of the first things that happens as a result of the merger is that Comcast keeps Universal and all of the cable properties (USA, Bravo, Syfy, etc.) and sells off the NBC properties to the highest bidder.
Perhaps this will meanNO more propaganda from GE through NBC. NBC stands to make a mountain of money if health care and cap and trade are passed through their industrial divisions. These two issues have been pushed by both Entertainment and News-all shows joining in “Going Green Week”.
Now that the e-mails, from scientists at the University of East Anglia show scientists allegedly overstating the case for climate change the whole ‘global warming ball is quickly coming apart. This e-mail fabrication story was not covered by NBC.
What magic will Immalt use now to keep his job before the stockholders
throw him out.
There is no doubt in my mind that Zucker helped secure the deal for Comcast take a majority ownership in NBC Universal. The transaction still has to go through anti-trust laws. Zucker was probably given the privileged position for brokering the deal, but everyone in Hollywood is expendable, just look at what happened at AOL Time Warner. All of those guys that spearheaded that deal have been fired or forced to retire. Zucker is now a pawn and I wouldn’t be surprised if he is out of a job within two years.
This is gonna be interesting to watch. Could be an indicator for how things will evolve.
Regarding yet another fake news story surrounding those climate emails:
Context you won’t get from Drudge or the Washington Times:
Trenberth, who acknowledged the e-mail is genuine, says bloggers are missing the point he’s making in the e-mail by not reading the article cited in it. That article – An Imperative for Climate Change Planning (.pdf) — actually says that global warming is continuing, despite random temperature variations that would seem to suggest otherwise.
“It says we don’t have an observing system adequate to track it, but there are all other kinds of signs aside from global mean temperatures — including melting of Arctic sea ice and rising sea levels and a lot of other indicators — that global warming is continuing,” he says.
Gavin Schmidt, a research scientist with NASA’s Goddard Institute for Space Studies, says the e-mails offer no damning indictment of climate researchers, and that bloggers are reading information in them out of context.
“There’s nothing in the e-mails that shows that global warming is a hoax,” he told Threat Level. “There’s no funding by nefarious groups. There’s no politics in any of these things; nobody from the [United Nations] telling people what to do. There’s nothing hidden, no manipulation.
“It’s just scientists talking about science, and they’re talking relatively openly as people in private e-mails generally are freer with their thoughts than they would be in a public forum. The few quotes that are being pulled out [are out] of context. People are using language used in science and interpreting it in a completely different way.”
Trenberth agrees.
“If you read all of these e-mails, you will be surprised at the integrity of these scientists,” he says. “The unfortunate thing about this is that people can cherry pick and take things out of context.”
ragincajun1987 says: Don’t be surprised if one of the first things that happens as a result of the merger is that Comcast keeps Universal and all of the cable properties (USA, Bravo, Syfy, etc.) and sells off the NBC properties to the highest bidder.
I spoke with a couple people at NBC and from what they’re saying…the expectation (internally) is something very similar to what you’ve outlined above. Comcast explicitly stated in the press release that their primary interest in the deal was the cable properties. What would be interesting is whether the regulatory agencies would require that Comcast KEEP the NBC network. There’s a long road ahead but I’m sure there are a bunch of NBC employees who are posting up their resumes today and dusting off their list of networking contacts.
Personally, I would hope that Comcast would give NBC a chance to recover but given that the Do or Die year for the Peacock is probably going to be 2010…I just don’t know if it will survive. Whenever companies are trying to push for mergers there’s a sentiment of maintaining stability and cutting costs…NBC can’t afford either of those mentalities if they’re going to right the ship. They need to take some calculated risks and this Comcast deal is not going to foster an environment of bold action…no one wants to rock the boat with these types of deals on the table. Especially in a weak economy and bad job market. Of course I could be wrong and Zucker or Gaspin might just pull out all the stops because they assume they’ll be forced out anyway, so why not go out with a bang…but my gut tells me GE will be doing everything in their power to keep the leash short and ensure the deal goes through.
Two things:
1) It will be VERY, VERY interesting to see Jeff Zucker report to anyone. (He doesn’t exactly live in fear of Immelt)
2) By the numbers, the real winner here, far and away, is Vivendi. They’re getting 5.8B for their 20%, and GE is getting 6.5B cash for 51%! That’s a net to GE of only 700m! But GE gets to offload 9B in debt (which Comcast got financing for), so I guess it’s a net of 9.7B to them.
My question is are other cable and satellite companies going to challenge the FCC on this? Comcast could c-block them by restricting what all channels their competition gets. Anybody know anything about this?
nkinsey, lots of interest groups will be attempting to get their own pounds of flesh from the deal during its regulatory approval phase, which is expected to take the better part of a year. It’s likely that the NBC affiliates will be howling the loudest, but I’d expect cable networks to be right in there as well.
Don’t you mean cable providers?
nkinsey, since the cable networks are going to be negotiating with a behemoth now for their redistribution fees, they have quite a vested interest in the NBC/Uni-Comcast deal.