LOS ANGELES – Comcast is buying the rest of NBCUniversal from General Electric several years ahead of schedule to take advantage of low interest rates and what its CEO calls a “very attractive price” of $16.7 billion.
The nation’s leading cable TV company is also paying $1.4 billion for NBCUniversal’s headquarters at 30 Rockefeller Plaza in New York – the home of the fictional “30 Rock” TV show – and for CNBC’s headquarters in Englewood Cliffs, N.J.
Investors thought the move was good for both companies – GE because it got cash for its stake earlier than expected and Comcast because it will benefit more from the rising price of sports rights and other TV programs. With the NBCUniversal businesses, Comcast avoids solely being in the uncomfortable position of passing those costs onto consumers. That was one reason Comcast bought a majority stake in NBCUniversal two years ago.
Comcast Corp. also raised its annual dividend 20 percent to 78 cents per share and vowed to buy back another $2 billion in shares this year. After Tuesday’s announcement, Comcast’s stock jumped 7 percent in after-hours trading. GE’s stock rose almost 4 percent.
Comcast’s business as a cable TV, Internet and phone provider generates nearly two-thirds of the company’s revenue. The NBCUniversal business makes up the rest, and includes the NBC and Telemundo broadcast networks, pay TV channels such as USA, CNBC, Bravo and SyFy, the Universal Pictures movie studio and theme parks in Florida and California.
Comcast has owned 51 percent of NBCUniversal since January 2011, and GE the rest. Comcast had planned to take a larger stake in NBCUniversal over seven years, paying for it from operating cash, starting in July 2014.
But CEO Brian Roberts told The Associated Press that the sale of Comcast’s stake in pay TV network A&E and some wireless spectrum gave it plenty of cash on hand. He also said Comcast got a good deal given that the market value of media conglomerates has been rising.
“We thought that we would have to pay more later,” he said. “We really have known we wanted to buy 100 percent from the beginning of the transaction. We wanted to learn the business. ... We feel that now is an opportune time.”
GE’s history with NBC goes back to 1919, when it co-founded the Radio Corporation of America. RCA created NBC as a radio network, figuring that people would buy its radios if they had interesting things to listen to. RCA took full ownership of NBC in 1932, but GE bought it back in 1986 to get a reliable source of cash while overseas manufacturing competition loomed.
In selling the remaining stake to Comcast, GE would free up cash to accelerate its share repurchase program to approximately $10 billion in 2013. It’s another step in the Fairfield, Conn., company’s efforts to focus on less glamorous – but theoretically more profitable – ventures such as manufacturing medical imaging equipment, airplane engines and electrical generators.
“This transaction allows us to significantly increase the cash we plan to return to shareholders in 2013, to approximately $18 billion, and to continue to invest in our industrial business,” GE CEO Jeff Immelt said in a statement.
The deal, expected to close by the end of March, values NBCUniversal at around $34 billion. It has about $5 billion in debt. When Comcast bought the 51 percent stake in the company in January 2011, it was valued at around $30 billion.
Jonathan Atkin, an analyst with RBC Capital Markets, said the transaction will make Comcast less vulnerable to rising TV programming costs. He compared it to Time Warner Cable Inc., whose shares have plunged 13 percent since it reported in late January that profit margins were being squeezed by higher programming costs.
“Look at what happened to Time Warner Cable,” Atkin said. “Comcast, as slightly more diversified conglomerate, is less exposed to that.”
Comcast, which is based in Philadelphia, said it would finance the deal with $11.4 billion of cash on hand, $4 billion in debt owed to GE, $2 billion from its own credit lines and $725 million in preferred stock issued to GE. In issuing new debt notes to GE, Comcast is able to lock in today’s historically low interest rates.
Comcast also posted its earnings results a day early, saying earnings rose 18 percent to $1.52 billion, or 56 cents per share, in the quarter through December. Excluding a favorable income tax adjustment, adjusted earnings came to 52 cents per share, falling short of the 54 cents per share expected by analysts polled by FactSet. Revenue rose 6 percent to $15.94 billion, also slightly below the $16.01 billion analysts were expecting.
Comcast lost just 7,000 video subscribers in the quarter, the best result in at least five years, ending the year with 22 million.
Roberts called the earnings results “great,” saying that if it weren’t for Superstorm Sandy, it would have added video subscribers for the first time in many years.
Comcast had bought the stake in NBCUniversal from General Electric Co. for $6.2 billion in cash and contributed its pay TV networks such as E! and The Golf Channel worth $7.25 billion. The deal closed after a year of regulatory scrutiny. The government imposed conditions intended to prevent Comcast from keeping NBC programming to itself at the detriment of other cable operators and video websites. One condition was that it would no longer have a say in the video website Hulu, which it jointly owns with the parent companies of ABC and Fox.
Regulators knew of Comcast’s intentions to buy full ownership when they approved that deal. As a result of it, GE’s stake in NBC Universal fell to 49 percent from 80 percent, but GE had planned to trim that to zero by being paid out from the venture. Before the Comcast deal closed, GE bought out the 20 percent stake held by France’s Vivendi SA for $5.8 billion in order to complete the deal.
As part of Comcast’s takeover, NBC Universal changed its corporate logo to NBCUniversal – without the space, the peacock or the globe silhouette. Officially, the company’s name is still NBC Universal, but the space-less design was meant to represent the unity of its two main divisions. In December, Comcast appended NBC’s peacock logo on top of its corporate name in a new logo of its own.