Comcast to own all of media giant

Comcast Corp. is buying out General Electric Co.’s stake in entertainment company NBCUniversal for $16.7 billion, and will take full control of a media conglomerate that includes the NBC network, Universal Studios theme parks, Universal Pictures film studio and cable channels USA Network, Bravo and MSNBC.

The purchase comes two years after the Philadelphia cable TV operator acquired a 51% interest in the media company, leaving GE with a 49% stake. Comcast had an option to buy more of GE’s interest beginning in July 2014. Comcast’s accelerated purchase indicates that the company is pleased with how NBCUniversal has performed.

“This is a historic day for Comcast and I’m very excited,” Comcast Chief Executive Brian Roberts said in an interview. “We believe that we are off to a strong start in turning around the company, and we feel that buying out GE sooner rather than later will allow us to create more value for our shareholders.”

The financial markets cheered Comcast’s move, which was announced after regular trading hours. Its shares closed at $38.97, up 0.9%, during regular trading, and jumped an additional 7% in the after-hours market. GE stock closed at $22.58, up about 0.6%, then climbed about 4% in after-hours trading.

The purchase, which is expected to be finalized by the end of March, will end GE’s storied and, at times, controversial ownership of NBC. After acquiring the company in 1986, GE was criticized for trying to instill corporate efficiency models that worked well in building aircraft engines and windmills but did not apply well to the hit-and-miss nature of the TV and movie business.

GE engineered the 2004 buyout of Vivendi Universal, which dramatically strengthened the media company by diversifying its revenue base by adding the Universal film studio, theme parks and the hugely profitable USA and Syfy TV networks.

However, the financial crisis of 2008 and 2009 hit GE particularly hard. The industrial giant cut back spending on NBC program development and tried gimmicks -- such as moving “Tonight Show” host Jay Leno from late night to prime time -- to slash costs. The budget trimming handcuffed the once-prestigious NBC network, and the new Comcast regime has yet to completely turn around the network’s fortunes.

In an attempt to shed assets and focus on its core strengths, GE ended up selling its interest in NBCUniversal at bargain-basement prices. The purchase price for GE’s interest plus NBCUniversal’s outstanding debt gives the media company a so-called enterprise value of about $39 billion.

The acquisition is expected to solidify Comcast’s position as the nation’s most valuable media company. The company’s market capitalization is currently about $105 billion, and when the deal closes the NBCUniversal entertainment assets and net income will be fully consolidated onto Comcast’s balance sheet.

Comcast’s timing and acquisition of NBCUniversal looks to be a smart bet. In the last two years, media companies’ shares have soared: Walt Disney Co. now is valued at $99.2 billion, News Corp. is worth $65.9 billion and Time Warner Inc. is worth $49 billion. (In 2004, Comcast pursued a $54-billion hostile takeover bid for Disney but was rebuffed by Disney shareholders.)

Comcast said it would also acquire GE’s space in 30 Rockefeller Plaza, the midtown Manhattan headquarters of NBCUniversal, and the CNBC headquarters in Englewood Cliffs, N.J., for about $1.4 billion.

The buyout of GE’s shares will be funded with $11.4 billion in cash on hand, money that was generated by NBCUniversal’s cash flow, proceeds from the sale of its stake in A&E; networks and Comcast’s sale of wireless spectrum to Verizon. The company is also using $4 billion in senior unsecured notes and will borrow an additional $2 billion.

“The whole company is healthy and interest rates are at historic lows. We do not have to stress the balance sheet to complete this transaction,” Roberts said. “We think this is an attractive opportunity for our shareholders.”

Fifty years ago Ralph Roberts, father of Comcast CEO Brian Roberts, made his original purchase of American Cable Systems, a 1,200-subscriber cable TV operator in Tupelo, Miss., for $500,000.

That purchase became the foundation stone of the Comcast cable empire, which has steadily added assets, including the 2002 takeover of AT&T; Broadband cable, which fortified Comcast’s position as the nation’s No. 1 cable operator.

Comcast announced the purchase as it released its fourth-quarter earnings. The company had a record quarter with net income up 18%, and it added 340,000 broadband Internet service subscribers while losing just 7,000 cable TV subscribers -- its best retention rate in years.

For the quarter ended Dec. 31, Comcast said it earned $1.52 billion, or 56 cents a share, compared with $1.29 billion, or 47 cents, a year earlier. Revenue climbed 6% to $15.94 billion.

NBCUniversal also shined in the quarter. Revenue rose nearly 5% to $6 billion. Operating cash flow jumped 11.4% to $1.05 billion.

Broadcast television revenue increased 7.9% to nearly $2 billion, on the strength of NBC’s fall schedule and political advertising at TV stations. Cable TV revenue was roughly flat at $2.2 billion.

Filmed entertainment, which includes Universal Pictures, generated a 9% increase in revenue to $1.38 billion compared with the year-earlier quarter.

However, operating cash flow fell about 5% at the film studio because of higher marketing costs. Theme parks saw revenue rise 4.5% to $520 million. Operating cash flow grew 9.7%.

Comcast also announced that it was increasing its dividend 20%.

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meg.james@latimes.com