"GE was reeling from the credit crisis, which had pummeled its giant lending arm"
LIBERATOR
the next round will take it to bankruptcy, total meltdown.
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http://online.wsj.com/article/SB20001424052748704107104574572122060500050.html
Comcast, GE Set to Unwrap NBC Universal Pact
By SAM SCHECHNER, JEFFREY MCCRACKEN And MAX COLCHESTER
After marathon negotiations, Comcast Corp. and General Electric Co.
are poised to announce Thursday a deal that would give Comcast control
of GE's NBC Universal, turning the cable-television giant into one of
the world's largest suppliers of TV shows and movies.
The deal—which has been in the works for nine months—comes after Paris-
based telecom and media company Vivendi SA agreed last weekend to sell
its 20% stake in NBC Universal to GE for $5.8 billion, according to
people familiar with the matter.
Late Wednesday, GE and Comcast were working to ready the transaction
for announcement, expected to be ready early morning.
If approved by regulators, the deal would give Comcast control of the
U.S.'s oldest television network, more than a dozen cable networks and
Universal Studios, which includes both the movie studio and theme
parks.
Together with its existing businesses, Comcast would oversee assets
with revenue of $51 billion in 2008, greater than that of Time Warner
Inc., Walt Disney Co. or News Corp.
The Comcast-GE negotiations were protracted in part because Comcast
pushed to lower the amount of cash it had to contribute to win
control, according to people familiar with the matter. Both sides also
clashed over how to buy out GE's remaining stake in NBC Universal in
the future, the people say.
Comcast won a concession that entitles GE to be paid for only half of
any increase in value of its remaining stake when it is bought out
down the road, according to people familiar with the matter. GE's
stake will be valued in future years through a public-markets
comparison of similar businesses, but with a premium attached as GE
had sought, the people said.
The deal runs against Wall Street's recent preference for breaking up
media companies. Time Warner, which owned cable networks of its own,
was cheered when it spun off its cable operation this year.
Stockholders have pushed Comcast's shares down more than 11% since
word of a potential NBC Universal deal surfaced in September.
But for Comcast, the deal is in part a way to cope with the tumultuous
media business. An explosion of ways to watch TV and movies on the Web
threatens to undermine some of the most lucrative parts of the
entertainment industry. DVD sales are down. Television reruns may lose
their value. Advertising sales are increasingly fragmented.
Even after Comcast absorbs the new business, more than three-quarters
of its operating profit will flow from its core cable- and Internet-
service business. That business is under siege from satellite,
telephone and Internet companies pushing TV shows directly to
consumers. In late October, Steve Burke, Comcast's chief operating
officer, warned at a conference that the growing popularity of online
video could prompt a new generation to cut off their subscriptions to
cable TV.
Comcast executives argue that owning more cable networks, which have
thus far proven resilient, is a good investment and that NBC Universal
will give Comcast scale to expand its dominance, according to people
familiar with their thinking. Comcast executives often point to
others, such as Liberty Media Corp. Chairman John Malone, who built up
fortunes controlling content and distribution together.
Already, Comcast, which provides cable-TV service to 23.8 million
homes and Internet service to 15.7 million homes, is rolling out a
system that will put TV shows on the Web for its customers. Comcast
has also been aggressive in pushing video-on-demand services. With NBC
Universal, Comcast will gain a ready source of content for those
subscription-only ventures.
For GE, giving up control of NBC Universal represents a major shift
more than nearly a quarter century after it bought NBC. The media
business has been a checkered arena for the financial and industrial
giant.
In part, GE's growing willingness to give up NBC Universal was a
question of capital allocation. GE was unwilling to invest more money
to buy other media assets, such as cable channels, that NBC Universal
executives thought they would need to grow, according to people
familiar with the matter.
The Comcast-NBC Universal tie-up is likely to draw scrutiny from
regulators and lawmakers for six months to more than a year, according
to legal experts and others familiar with the matter. While the
government isn't expected to block the deal, the new venture may be
forced to accept tough conditions on how it conducts business, these
people said.
Already, at least some owners of competing television networks are
communicating their concerns about the deal to Washington legislators
and regulators, people familiar with the matter said.
The deal largely follows a template hammered out over the summer,
people familiar with the talks said. It merges NBC Universal, valued
at $30 billion, with Comcast's portfolio of cable networks and some of
its Web assets, valued at $7.25 billion, according to people familiar
with the matter.
Comcast will inject cash in the range of $6.5 billion, after some
adjustments, and receive an initial 51% of the venture, the people
said.
The joint venture will also take on about $9 billion in debt, giving
it an initial equity value of about $28 billion, the people said.
The deal structure presents risks, said Bob Wright, former chief
executive of NBC Universal. "It's going to be a management challenge
when one party is looking to grow and the other party is looking to
get out," Mr. Wright said. But GE could benefit if the venture
performs well, he said, adding, "Yes, it's a risk, but there's also
upside."
GE has publicly stated its intentions to focus its spending and
research in coming years more on its industrial businesses such as
energy turbines, aircraft engines and health care, rather than on
service-oriented businesses like finance and media.
GE was advised on the deal by J.P. Morgan Chase & Co. and Goldman
Sachs Group Inc. Comcast was advised by Morgan Stanley and UBS AG.
Barclays Capital advised Vivendi.
—Paul Glader and Shira Ovide contributed to this article.