Comcast Buying NBC Makes Me Nervous - Should I Be?

Comcast is a pretty big company above and beyond the obvious of providing cable services to the masses, and now it's in the process of acquiring NBC.

Last year, when the economy was in the tank and "Joe the Plumber" was scared for his job and cutting back on his spending, Comcast had set itself up to survive the economic instability.  In 2008, Comcast made .91 cents a share in earnings, which equates to revenues of $34.3 billion. They made a gross profit of just over $20 billion and their reported net income was that of $2.5 billion.

With Comcast buying into NBC Universal for a majority ownership, that leaves parent company, GE (General Electric), with 49% ownership stake. Comcast is paying out to GE around $6.5 billion in cash and $7.25 billion in programming for that 51% stake. GE remains in control of the rest of the company, valued at $30 billion in the complicated deal.

Key Elements Of The Transaction are as follows:

• 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 move is seen as a protective measure against the possible dwindling number of cable TV subscribers as more and more people flock to the internet for their entertainment. Or, Comcast simply wants to own more movies and TV shows.

As it stands, these two companies individually both bring an impressive portfolio into an even more impressive, collective portfolio.

The different parts of NBC include

  • Bravo,
  • CNBC,
  • Hulu (Joint venture with Fox Entertainment Group, and ABC)
  • iVillage,
  • MSNBC cable TV,
  • NBC News,
  • NBC Universal Television Group,
  • NBC,
  • qubo,
  • Syfy,
  • Telemundo Television Studios,
  • The Weather Channel,
  • Universal Orlando Resort in Orlando, Florida
  • Universal Studios Florida
  • Universal Studios Hollywood in Universal City, California
  • Universal Studios Japan in Osaka
  • Universal's Islands of Adventure
  • USA Network,
  • Wet 'n Wild - Orlando

NBC Universal Global Networks include:

  • 13th STREET,
  • Studio Universal,
  • Universal Channel,
  • the international (non-U.S.) Hallmark Channels,
  • Movies 24,
  • Diva TV,
  • KidsCo (joint venture).

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