Comcast Takes Majority Stake from GE in NBC Universal Deal

A joint venture agreement between Comcast Corp. and General Electric over a majority stake in NBC Universal is finally complete. Upon Vivendi’s sale of its 20% stake in the entity, which is valued at $5.8 billion, Comcast will assume 51% ownership of the company, leaving GE with a 49% minority interest. Currently, GE owns 80% of NBC U, which the two companies have valued at about $30 billion. The deal entails the spinoff of NBC U and $9 billion in debt. It also merges Comcast’s content assets and includes a $6 billion cash contribution.

Fending off aggressive competition from online video, satellite and phone providers that offer subscription TV services, Comcast will gain lucrative cable channels such as Bravo, CNBC, and Telemundo as well as the Universal Pictures movie studio and theme parks. The deal allows Comcast to diversify its holdings, as one of the nation’s largest entertainment companies rivaling its competitor, The Walt Disney Co.  Although the merger will inevitably bring layoffs and restructuring, Hollywood is elated at the possibilities of the sale.  TV executives have long resented GE’s control over NBC, believing that its quarter to quarter manufacturing mentality has hindered NBC’s positioning versus the three other leading networks. Executives claim that “You can’t Six Sigma your way out of fourth place.” They are excited for a media conglomerate to take a greater stake in NBC’s growth and corporate culture. Others claim that GE’s frugality has kept NBC chugging along steadily, preventing overvaluation or unsustainable growth

The detailed deal also includes various provisions on advertising.  GE agreed to purchase $59 million per year in advertising on NBC Universal properties for 5 years upon closure of the merger. GE also retains the right to persuade Comcast to buy half of its remaining 49% portion of NBC U for three and a half years after the deal is finalized, and the remaining stake after seven years. Exit provisions are critical to joint venture deals because they offer partners a timetable and a way out.     Although Comcast will have operational control of NBC U, GE will have certain veto powers as long as it owns a 10% minority interest in the company. GE must grant approval for any NBC U acquisition over $500 billion or any moves that would incur debt upwards of $250 million.  The real kicker is GE’s $60 million advertisement deal involving NBC U’s coverage of the 2012 Olympic Games in London.

The deal could take more than a year to close, as both parties await approval from the Federal Communications Commission.  The SEC filing also states that either entity can call off the deal if it has not closed by the one year mark of the announcement on December 3rd. GE shares increased more than 1% Tuesday, while Comcast rose almost 2%.