Comcast Corp. (CMCSA:US), the largest U.S. cable company, will buy out General Electric Co.’s ownership of NBC Universal for $16.7 billion, following through on the cable company’s purchase of a controlling stake two years ago.
The deal also involves buying the properties used by NBC Universal at Manhattan’s 30 Rockefeller Center and CNBC’s headquarters in New Jersey for $1.4 billion, Comcast said today in a statement. The enterprise value of NBC Universal is now $39.1 billion, up from $37.5 billion when Philadelphia-based Comcast bought the stake in 2011.
Comcast, the biggest U.S. cable company, bought 51 percent of NBC on Jan. 29 of that year for $13.8 billion in cash and assets. Since then, the company has benefited from improving ratings at the NBC broadcast network and better-than-expected ad revenue from the Olympics. For GE, the deal turns an asset that didn’t fit with its business into a source of cash.
“This is an attractive price for us and it gives GE a lot of cash,” Comcast Chief Executive Officer Brian Roberts said in an interview. “We like the NBC Universal business.”
Comcast shares jumped as much as 9.1 percent to $42.50 in extended trading after the deal was announced. GE’s stock climbed 4.3 percent to $23.54.
The sale will result in a pretax gain of about $1 billion for GE, the Fairfield, Connecticut-based company said in a separate statement. Those gains will be offset by increased restructuring costs this year, GE said.
The company will use proceeds to increase repurchases of its shares by $10 billion a year, GE said. Its board boosted its buyback authorization to $35 billion, of which $23 billion remains available.
“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. “By adding significant new capital to our balanced capital allocation plan, we can accelerate our share buyback plans while investing in growth in our core businesses.”
GE used money raised from the initial sale to bolster its energy division, with purchases including Dresser Inc. and the well-support division of John Wood Group Plc. In total, the company spent $11 billion on the acquisitions in a six-month spree that ended in 2011.
Comcast also released its fourth-quarter results today. Net income (CMCSA:US) rose 18 percent to $1.52 billion, or 56 cents a share, from $1.29 billion, or 47 cents, a year earlier. Sales climbed almost 6 percent to $15.9 billion.
Comcast lost 7,000 video subscribers in the period, part of an industrywide trend of shrinking cable-TV viewers. Still, the company would have posted a gain for the first time since 2007 if Hurricane Sandy hadn’t occurred, Roberts said.
Comcast added 341,000 high-speed Internet customers and 168,000 voice customers. Both figures topped analyst estimates.
Comcast also raised its dividend 20 percent to 78 cents a share annually, and the cable operator announced it plans to repurchase $2 billion of its stock in 2013.
Morgan Stanley and Davis Polk & Wardwell advised Comcast on the GE deal. JPMorgan Chase & Co. provided financial advice to GE, while Weil, Gotshal & Manges served as the company’s legal adviser. Goldman Sachs Group Inc., Centerview Partners and CBRE also provided strategic advice related to the transaction.
Comcast Chief Financial Officer Michael Angelakis had said in September that the company was considering purchasing the remainder of NBC. The network has relied on hit shows such as “Sunday Night Football,” “The Voice” and “Revolution” to boost ratings over the past year, following years of last-place showings.
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