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NBC-Comcast: Done Deal

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Cable giant Comcast finally has its content deal, making official an agreement with General Electric Thursday morning that will give the largest U.S. cable operator a 51 percent stake in a joint venture that combines Hollywood player NBC Universal with Comcast's content assets.

The agreement values NBCU in its current form at $30 billion. This compares with the $43 billion valuation that formed the basis of the 2003 deal that created NBCU in its current configuration. However, that came before such recent acquisitions as cable network Oxygen and iVillage.com.

Comcast is contributing its cable nets, including E!, Versus, Golf Channel and 10 regional sports networks plus digital media properties. All this is valued in the deal at $7.25 billion, up from the previously expected $6 billion price tag. In addition, Comcast will pay GE about $6.5 billion in cash, up slightly from what Wall Street had pegged at $6 billion. The final cash figure will depend on adjustments made before the deal closes, including certain performance measures.

When combining the results for Comcast and NBCU, the revenue of the assets that the cable giant would control reached $51 billion in 2008, exceeding those of Walt Disney, Time Warner and News Corp.

The board of the joint venture will be made up of three Comcast directors and two GE directors. No board members were immediately named. NBCU president and CEO Jeff Zucker will run the day-to-day operations of the joint venture as CEO, reporting to Comcast COO Steve Burke, the firm's content specialist and former Disney executive. Burke reports to Comcast chairman and CEO Brian Roberts.

GE is expected to sell its 49 percent stake in the new entertainment giant in two stages. The first option to sell half kicks in three-and-a-half years after the deal closes, with the second option coming three-and-a-half years later. Comcast also has rights to buy GE's interest at certain times.
 
The last hurdle for the Comcast deal announcement was Vivendi's 20 percent stake in the entertainment company, which the French telecom and media firm in recent days agreed to sell to GE for $5.8 billion. The two firms confirmed that deal today and said Vivendi would get its first $2 billion payment covering 38 percent of its stake in September 2010. GE would then acquire the rest for $3.8 billion when the transaction closes.
 
Amid an expected tough regulatory review, Comcast on Thursday made a range of voluntary public interest commitments and argued the agreement would benefit consumers.
 
"The opportunity to combine these assets makes possible some innovative programming opportunities that will permit the new company to better serve the interests of many key segments of the viewing audience, including local viewers in the markets served by NBCU's owned-and-operated stations, and the particular interests of Hispanics, African Americans, children and families, and other key audience segments," said Comcast evp David Cohen in a public letter. "This combination also permits us to hasten the arrival of the multiplatform, 'anytime, anywhere' future that Americans want."

Roberts on Thursday called the deal "a perfect fit" for Comcast and said it would help the company "accelerate the development of new digital products and services."

In the direction of Comcast shareholders, he said the deal would provide "attractive financial returns and build shareholder value." He also emphasized that the structure of the deal, which limits the immediate cash outlays, allows Comcast to continue to return capital to shareholders.

GE chairman and CEO Jeff Immelt, meanwhile, pointed to an expected generation of $8 billion in cash at closing for his company. While analysts have argued that the conglomerate is selling a majority stake in NBC Uni at a time when media and entertainment valuations are still low, "GE gets a good value for NBCU," he said. "NBCU has been a great business for GE over the past two decades." Immelt cited an average annual return of 11 percent from the business for GE.

Zucker looked ahead by calling the deal "the start of a new era for NBCU," adding he was "genuinely excited" to lead the firm "at this important time in our history."


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