Comcast: Megadeal of the year stirs the biz

Dealmakers Impact Report 2010

Comcast’s proposed purchase of a 51% stake in NBC Universal from General Electric is a big deal every way you look at it. To accomplish the planned $30 billion merger, cable giant Comcast alone spent $154 million in transaction-related costs in the first nine months of the year.

That’s for lawyers; fees for investment bankers and lenders; accountants; investor, government and public communications; and myriad regulatory compliance actions.

The 11 execs profiled here are midwives to the transaction that will meld the 107,000 employees of Comcast and 15,000 workers at NBC Universal. They conceived of the merger, persuaded shareholders and started the regulatory approvals process.

Regulators are likely to approve the merger, but the big question is with what restrictions attached? Competitors, suppliers, labor unions and advocacy groups flooded the Justice Dept. and Federal Communications Commission with filings of objection or support. More than 34,000 comments have been filed just to the FCC (the vast majority are mass-duplicated form letters).

The parties expect the transaction to close by year-end, with Comcast taking a 51% controlling stake in NBC Universal in exchange for $7.1 billion in cash and throwing in the bulk of Comcast’s programming assets, valued at another $7.25 billion. In 3 1/2-to-8 years, Comcast is expected to buy the remaining 49%, which seller GE plans to unload to tighten the conglomerate’s focus on financial services and industrial products.

Philadelphia-based Comcast will add its basic cable networks — E!, Golf Channel, all-sports Versus, gamer G4, Style Network and 11 regional sports networks — to NBC Universal’s larger stable of Bravo, CNBC, Oxygen, Syfy, USA Network, 25% of The Weather Channel and others. Of course, NBC Universal also includes NBC and Telemundo, Universal Pictures and theme parks.

Comcast has long been on the lookout for content distribution and Hollywood assets — it made an unsolicited $66 billion takeover bid for Walt Disney Co. in 2004 that was eventually dropped. The cable giant is a 20% investor in the consortium that owns MGM.

While Comcast is a publicly traded company with $37 billion in pre-merger annual revenue, it is also something of a family affair, led by Brian L. Roberts, whose father Ralph Roberts is founder, chairman emeritus and corporate director. They rode the wave of wiring America, and today Comcast accounts for 24% of all U.S. subscription TV households.

But that wave is cresting, evidenced by the aggregate of subscription TV’s total household count slipping this year — the first decline in its half-century history. Meanwhile, cable nets continue to ride high, with carriage fees climbing and advertising growing.

Comcast can wring extra value out of NBC Universal content and distribution assets, such as theatrical fare and TV programs that are ideal for Comcast’s on-demand channels. Allowing cable subscribers to watch their subscription TV programs on an assortment of other devices such as iPads and smart phones at no extra charge is the idea behind Comcast’s Xfinity initiative. That is designed to increase subscriber satisfaction and to discourage “cord cutting” by Comcast’s 23.2 million subs.

Comcast is already a sizeable player in new media as owner of video portal Fancast, cinema ticketing service Fandango, Movies.com, XfinityTV.com, online address book service Plaxo, upscale lifestyle website DailyCandy and portal Comcast.net.

Brian L. Roberts
Chairman/CEO, Comcast
Roberts welled up his courage to buy NBC Universal, given that the deal came together as the financial crisis was still buffeting the global economy. But as markets stabilized, the move seemed less risky. “We are more excited about the prospects of this combination now than (when) we first announced the transaction last December,” Roberts told stock analysts July 28. “The market is (more) favorable than we assumed it would be … (and) a lot of the financing that we are putting into place has come in at a very attractive rate.” Roberts’ main rationale for the deal — to get NBC U’s basic cable networks to complement his cable systems — remains sound as basic cable channels continue to boom.

Steve B. Burke
COO, Comcast
Burke is the insider who is the already-in-place go-to guy on content and entertainment issues at a company better known for expertise with coaxial cables and modems. Burke held a variety of senior executive posts at Walt Disney Co. before joining Comcast in 1998, so he’s already savvy on NBC Universal’s businesses. Among the new businesses that Comcast gets are Universal theme parks, and Burke holds vital experience as former president of Disney’s part-owned theme park in Paris. At press time, in advance of the deal’s closing, Burke already announced significant executives changes at NBC once Comcast is majority owner.

Michael J. Angelakis
CFO, Comcast
Juggling the finances of Comcast was never simple, but Angelakis took on the even bigger challenge of explaining the complex NBC Universal acquisition to investors, lenders and regulators. The acquisition’s first step calls for Comcast to buy a 51% stake, at which time NBC Universal will become a joint-venture subsidiary shouldering its own obligations. “When the transaction closes, (various) costs actually become absorbed by the joint venture,” he told investors Sept 22. “So when the deal closes, we really look at it as not having transaction-oriented costs.” Comcast has an option to buy out the remaining 49% of NBCU in the near future.

David L.Cohen
EVP, Comcast
Cohen’s mantra is that the purchase of NBC Universal is “pro-competitive, pro-consumer and strongly in the public interest.” While some might scoff, Comcast’s communications chief marshals this logic for regulators in Washington, D.C. and advocacy groups. “It wasn’t until we made an investment in MGM (buying a 20% stake in 2005) that we were able to obtain more movies to ramp up our VOD offerings, and that got consumers really interested” in cable VOD, Cohen blogged.

Robert S. Pick
Senior VP, corporate development, Comcast
Acquisitions hinge on a mutually agreeable price tag and transaction structure — an area where Pick excels at arranging a meeting of the minds. A 20-year Comcast veteran who was point man on transactions that grew the company from 2 million cable subscribers when he started to 23.2 million today, Pick says that NBC Universal represents “vertical integration” by loading Hollywood content on the Comcast distribution machine. He helped arrange Comcast’s buy of basic cable network E! Entertainment (gaining full ownership from former partner Walt Disney in 2006), and he sits on boards of Comcast’s various ventures.

Jeff Zucker
Outgoing CEO, NBC Universal
Zucker served as an enthusiastic public voice of Comcast’s acquisition for 10 months, pointing out that the cable giant has a “singular focus” on media — something that industrial giant GE doesn’t match. But in September, he announced that he will exit prior to the Comcast takeover, becoming a casualty of the transaction he shephered (with a multimillion-dollar severance package). In his goodbye memo to staff, Zucker, who is 45 and best known for fierce pursuit of corporate profits, got personal about his 24-year career at the company, writing “This is the only place I have ever worked. … I met my wife here.”

Salil Mehta
President, business operations, strategy and development, NBC Universal
Mehta knows media from every angle, so it’s no surprise that he leads the transition team overseeing operations for the NBC Universal side of the merger. “In an industry that has seen — and will continue to see — radical change, the Comcast-GE-NBC Universal combination will create a much stronger company that is far more than the sum of its parts,” says Mehta, who job is to spot and capitalize on new business trends. He worked 14 years at Walt Disney and its ESPN unit before joining NBC Universal in 2008.

Lynn Calpeter
CFO, NBC Universal
Calpeter has experienced more than one gamechanger in her career at NBC Universal. “The deal we did in 2004 with Universal (merging with NBC, where she worked) transformed the company, giving us great cable assets and a movie studio,” she says. “This transaction will be just as transformative.” Comcast bulks up on high-profit basic cable networks while NBCU gets media distribution expertise, especially with digital technology.

Rick Cotton
General counsel, NBC Universal
Chief legal eagle Cotton likes to look at the Comcast merger from a content viewpoint. “From an NBCU perspective, this new partnership represents an opportunity for increased investment in all programming areas, as well as the opportunity to benefit from Comcast’s dedicated focus on technological innovation in the delivery of content,” he says. Cotton is the public face of NBCU’s anti-piracy fight and is known for tackling intramural issues such as caps on owning TV stations.

Keith Sherin
CFO, General Electric
Sherin framed the sale of NBC Universal in terms of financial benefits at GE’s annual shareholders meeting. For the 20 years that GE owned broadcaster NBC, it averaged a healthy 11% annual return on investment based on Comcast’s purchase price. Sherin added that selling NBC Universal “simplifies our portfolio” of businesses.

Pam Daley
Senior VP, corporate business development, General Electric
The mission of any corporate development executive is to constantly explore potential transactions behind the scenes. Although most negotiations go nowhere, GE has twice come up with transformational mergers for NBC Universal following clandestine meetings where each side dickers over price. Daley was co-negotiator for the sale to Comcast and earlier shepherded the transaction that melded GE-owned NBC with Universal Pictures.

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