Comcast: Brian Roberts is finally a full-fledged media mogul. Ever since the Comcast chief made his quixotic 2004 bid for Disney, the cable operator’s shareholders have been in limbo. The wait is over with Roberts’ deal to take control of NBC Universal from General Electric. But as Vivendi and then GE have learned, transformational deals involving NBCU assets haven’t always turned out so well.
Comcast says this time it’s different, and it has some justification. For one thing, the group controlled by the Roberts family is shopping in a buyer’s market. Not only is Comcast acquiring a media business in the trough of an economic and advertising downturn. It has the additional advantage of dealing with motivated sellers.
GE needs to redirect capital and management focus on its troubled financial services arm and its core industrial infrastructure operations. Vivendi, the owner of 20 per cent of NBCU, needs the money for its telecoms exploits in Brazil and elsewhere.
As a result, Comcast is paying a reasonable price. The cable businesses of NBCU alone justify at least $22 billion of the $30 billion value ascribed to NBCU, based on a multiple of cash flow lower than what Scripps recently paid for the Travel Channel. So Comcast is arguably paying just $8 billion for the higher-profile broadcasting arm and the Universal film studio and theme parks — assets prized, and expensively acquired, by NBCU’s previous owners.
The deal has also been structured to limit the cable group’s exposure. The providers of NBCU’s $9.1 billion of new debt — the proceeds of which will be used to pay GE — won’t be able to go to Comcast for repayment. And since the company’s only cash outlay in the deal is a $6.5 billion top-up payment to GE, Comcast is keeping its investment-grade credit rating.
The process by which Comcast can buy from GE the 49 per cent of NBCU it won’t initially own offers the cable operator protection, too. The price will be based on a fair market value, and if it exceeds what Comcast is paying now for 51 per cent, the company will share the premium with GE.
Comcast’s ardor may not be all that different from the attraction GE felt for television and Vivendi for Hollywood when they bought the assets that make up NBCU today. Neither company managed to turn their initial enthusiasm into a successful relationship. At least Roberts’ long wait for a deal has given him a chance to protect Comcast’s shareholders to some extent from any disillusionment.
