Comcast in deal talks with NBC Universal

Cable giant Comcast Corp. is kicking the tires of NBC Universal, according to people familiar with the situation.

Comcast, the nation's largest cable operator with almost 25 million subscribers, has been looking to increase its content holdings for several years. In NBC Universal it would get its hands on not only a big broadcast network and movie studio, but also several powerful cable channels, including USA, Syfy, CNBC, MSNBC and Bravo.

NBC parent General Electric has often denied that it is interested in selling its entertainment holdings. Of course, if history is any guide, Comcast doesn't necessarily wait for an invitation before making a play. Five years ago it made an unsuccessful run to buy Walt Disney Co. for $54 billion.

The price tag for NBC Universal would be substantially less than that. A recent analyst report from J.P. Morgan analyst Stephen Tusa valued NBC Universal at $30 billion to $35 billion. However, such a deal would likely be very complex because there would be huge tax implications for NBC Universal parent General Electric, which first bought NBC in 1986 for $6.5 billion. 

That is still a pretty steep price tag for Comcast to swallow. The cable giant has a market cap of $48 billion and about $4 billion in cash so if it were to buy all of NBC Universal, it would be a highly leveraged transaction.

Speculation that GE may be looking to unload NBC Universal has heated up as of late in part because the French conglomerate Vivendi, which holds a 20% stake in the entertainment unit, may look to unload its interest before the end of the year. There have been questions raised as to whether GE -- which has first dibs on the Vivendi interest -- could muster the $4 billion - $5 billion needed to buy back the stake or whether another company such as cash-rich Time Warner or Comcast would step in and buy it.

Whether Comcast is making a serious run at all of NBC Universal outright or just in acquiring a stake in the company or forming a joint-venture remains to be seen.

In a statement, Comcast denied a report from industry website The Wrap that it had a deal to buy NBC Universal, but it declined to elaborate on any other talks it may be having with NBC Universal. A spokeswoman for NBC Universal declined to comment.

For Comcast, getting all or some of NBC Universal would give it programming assets to match its distribution clout. It currently only owns a handful cable networks including E! Entertainment Television, Versus, the Golf Channel, G4 and 10 regional sports networks. None of its cable networks have the commercial success of NBC's assets.

While NBC has lots of assets, many of its entertainment holdings are struggling. Its Universal Studios is in a slump at the box office and its management the NBC network is mired  in fourth place in both viewers and demographics. It's big gamble this fall, putting Jay Leno on in prime time, has not delivered big ratings yet although it may prove to be a smart financial gamble. In the first half of 2009, NBC Universal made $1.6 billion on revenues of $7.5 billion. Its revenue accounts for less than 10% of General Electric Co.'s total revenue.

-- Joe Flint

Previous Posts:

Vivendi's Levy stays mum on plans for NBC Universal stake

New round of speculation starts on GE's plans for NBC

Comments

[Brad C]

I am a DirecTV subscriber. We have already lost Versus (owned by Comcast) because they want to charge extortion rates for the channel. Will Comcast charge competitors reasonable fees for the 10 or so NBC/Universal channels or resort to more extortion for those too?

This from the DirecTV web site>>>

Unfortunately, the Versus sports network is no longer available on DIRECTV. DIRECTV's contract to carry Versus ended at the end of August. While it was obvious we could not immediately come to terms on a new deal, DIRECTV offered to keep Versus up temporarily under the old deal while we continued to negotiate, but Comcast declined. In fact, they sent us a letter saying that if we didn't agree to the terms they had on the table at the time, that we had no choice but to take it down at the beginning of September. Since then, we've been negotiating to try and come to terms on a new contract.

DIRECTV has negotiated hundreds of programming contracts like this over the years and has always been able to negotiate a fair deal that was equitable for both sides.

However, thus far, Versus has not presented us with a deal that is acceptable with respect to all material terms and conditions. Our goal is to reach an overall deal that will allow us to provide the best programming at the fairest prices to all of our customers. We feel the best way to get a deal done is by negotiating face-to-face, not through the media and the public. We are speaking with senior Comcast execs now to try and get this done.