NBC Universal Comcast Merger is Here, Really!
Posted by Ashley McChesney on Thu, Dec 03, 2009 @ 12:28 PM
Comcast says it has worked out a $13.75 billion deal with General Electric to start a joint venture that will control NBC Universal, including Universal Studios and Islands of Adventure in Orlando. Comcast would own 51% of the venture, giving the nation's largest cable provider control over the company.
Comcast's release to investors says the venture will control a 50% stake in the Central Florida parks, and 100% of the parks in California. The deal also includes the NBC TV network, local stations in 10 of the top U.S. markets, and the Spanish-language Telemundo network.
Here is an excerpt of the release:
Key Elements Of The Transaction:
- 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.
Shares of Comcast jumped 96 cents, or 6.4 percent, to $15.90 in morning trading Thursday (the morning of the announcement.)
At this point the merger is meeting a lot of criticism from financial experts, even so far as them calling for President Obama to stop negotiations, saying it would be much to powerful. Read more on that here.
The stats:
Comcast is both the largest cable company and the largest residential broadband provider in the United States: a $34-billion business with 24 million subscribers, reaching nearly one out of every four homes in the country.
NBCU owns NBC, MSNBC, CNBC, Universal Studios, 27 television stations, and a host of other properties.
What do you think, too powerful to be allowed?
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