Comcast Buys a Bunch of Awesome Cable Networks and Some Broadcast Thing Called 'NBC'
GE and Comcast officially announced that this morning that they've come to terms on a deal over NBC Universal. It's really, really complicated, but the upshot is that Jeff Zucker still has a job for some reason.
Comcast will own 51% of NBC Universal, and GE will own 49%. It's simple really: NBC will borrow $9.1 billion and give it to GE, which will pay $5.8 billion to Vivendi for its share of NBC Universal, and Comcast will pay $6.5 billion to GE, which will contribute its share of NBC Universal, valued at $30 billion, to the joint venture with Comcast, which will contribute its networks, valued at $7.25 billion, to NBC Universal. In the end, GE will clear $9.8 billion and still own just under half of NBC Universal. Why is it structured so insanely? So nobody will have to pay any taxes, of course: GE expects to make $8 billion on the deal after taxes, existing debt, and transaction costs. We don't know how much debt and what the transaction costs are, but the very maximum GE could pay in taxes is $1.8 billion, or 20%. The tax rate for someone making $34,000 a year, by way of comparison, is 25%.
GE intends to slowly unload its remaining share over the next seven years. The deal will have to be approved by FCC and the Justice Department, which is expected to take nine to twelve months. Having MSNBC, CNBC, and NBC News ought to come in handy in convincing the Obama administration to sign off, we imagine. And we look forward to the rancid hypocrisy of News Corp.'s Fox News decrying that conflict of interest over the next year.
The deal is being spun as, essentially, a purchase of NBC Universal's cable assets—USA Network, the SciFi Network (which some idiot decided to call SyFy), Bravo, etc.—which conveniently obscures the question of the money pits at the center of NBC Univeral's brand, the NBC television network and station group. Both are in an extended freefall owing to the genius of Jeff Zucker, the president of NBC Universal. But that doesn't matter, because the cable networks make money, and Comcast owns the cable pipes, so there's got to be a way to leverage that into even more money, right? In a just-ended executive conference call with reporters on the transaction, the word "synergy" came up a lot, unironically, which doesn't bode well. But what do we know?
Zucker, as we predicted, is going to keep his job, at least for now, according to a little birdie (also named Jeff Zucker!) who talked to the New York Times. His new contract will keep him on through regulatory approval of the deal and "include language promising that his role as chief executive will continue in the new joint venture," the Times says. But Zucker shouldn't rest too easy. To read the Times' play-by-play of how the deal went down, it seems like Comcast CEO Brian Roberts and GE CEO Jeff Immelt don't really trust him: Zucker wasn't told of the early negotiations, and when Immelt first met with Comcast co-founder Ralph Roberts to talk it over at a media conference, he took care to physically avoid Zucker so as not to raise his suspicions. It was a smart move:
For nearly six months, only a small cadre of G.E. and Comcast executives knew about the deal — nobody at NBC was ever told — and it had not leaked. On Sept. 30, several hours after the talks were disclosed to a tiny group of executives at NBC, the blockbuster talks appeared on TheWrap.com, a Hollywood news site.
"I'm telling you to be prepared for this to leak," Mr. Sherin had told Mr. Angelakis earlier that day.