Vivendi clears path for GE-Comcast deal


Media colossus NBC Universal is a giant step closer to being sold to the nation’s largest cable company in a proposed $29-billion deal that could reshape the entertainment industry and lead to changes in how consumers get their movies and TV shows.

The last hurdle in Philadelphia-based Comcast Corp.’s bid to become one of the country’s most powerful entertainment companies was overcome when General Electric Co. -- which has owned NBC for nearly a quarter-century -- reached an exit strategy with its French partner Vivendi.

Monday’s development breaks a logjam that has held up the sale of NBC Universal. It also sets the stage for a reordering in Hollywood, where many decisions about what will be shown on the big and small screens would be determined by a cable company that has a pipeline into about 20% of the homes in the country.


Before GE can sell control of NBC Universal to Comcast, however, it needs to buy Vivendi’s portion of the company.

For more than a month, GE and the French telecommunications firm have been squaring off over the worth of Vivendi’s 20% ownership of NBC Universal. The high-stakes, transatlantic poker game included GE Chief Executive Jeffrey Immelt’s traveling to Paris last week to push along the negotiations.

A person close to the negotiations said that Vivendi had agreed to sell its stake in NBC Universal for $5.8 billion.

Nonetheless, the landmark transaction with Comcast wasn’t quite finalized Monday, and finishing touches were still being applied, according to two people close to the situation. An announcement could come as early as this week, they said.

GE and Vivendi officials declined to comment.

For more than six months, Comcast has been in discussions to take control of NBC Universal, forming a media juggernaut that would encompass the NBC broadcast network; Hollywood movie studio Universal Pictures; more than a dozen cable channels including USA, Bravo, MSNBC, CNBC and E; the Spanish-language television network Telemundo; and multiple theme parks.

The planned marriage of the conservative Philadelphia company with Hollywood glitz is the fruition of Comcast Chief Executive Brian Roberts’ longtime ambition to transform his family-controlled enterprise into a leading producer of content, for both television and movies. Despite previous attempts to break into the show-business big leagues, owning the most prized assets in media -- a broadcast network, top-tier cable channels and a movie studio -- had until now eluded Roberts.

Under the terms of the planned merger deal, Comcast would contribute its entertainment cable channels, including E and Style; nine regional sports networks; and about $6 billion in exchange for 51% ownership of the new venture.

GE would contribute NBC Universal and receive a 49% stake in the joint entity. It would also get about $9 billion, which the new venture would provide by taking on debt.

The deal calls for Comcast to buy out GE’s remaining interest within eight years. GE has long prided itself on strong management, so giving up control of NBC Universal represents, in some ways, a concession that it no longer has the will or ability to navigate the rapidly changing media landscape -- and to generate the enormous profits -- because of wholesale shifts in technology and consumer behavior.

The GE-Vivendi breakthrough was first reported by the Wall Street Journal.

Comcast has long wanted to control more of the entertainment that flows through its wires into subscribers’ homes. Its desire to get a lock on content, and influence whether TV shows and movies will be offered free over the Internet, have been key factors driving its interest in NBC Universal. Comcast traditionally has acted as a bundler of television channels and broadband Internet services.

In recent years, Comcast and other cable TV operators have faced rising competition from phone companies and satellite broadcasters elbowing their way into the business.

But Comcast’s conquest of NBC Universal won’t happen overnight. The deal is expected to undergo a lengthy regulatory review, perhaps a year or longer, before the two companies are allowed to combine.

Comcast’s bold stroke to gain control of NBC Universal, after a lull in activity by Wall Street deal-makers, runs counter to the break-up trend among media giants. Time Warner Inc. spun off its cable system division this year, and next week it plans to jettison its AOL unit. Four years ago, Viacom Inc. split from CBS Corp. Those companies determined that it was nearly impossible to get their seemingly related businesses -- movie studios, TV networks and Internet sites -- to work smoothly together.

“Both inside and outside of the media industry, even the best executives have found it to be a challenge to manage the far-flung enterprises that make up a conglomerate,” said Jonathan Knee, coauthor of the book “The Curse of the Mogul,” which looks at the spotty track record of media mergers.

These days, much of Hollywood is cast as “old media” and has largely fallen out of favor on Wall Street. Traditional entertainment companies appear to face a future of constrained growth as they increasingly get squeezed by entrenched costs, declining revenue, piracy in overseas markets and the challenges of online distribution.

That’s why Comcast’s strategy to double down on traditional media assets evokes the grand-strategy media mergers of the 1990s and early 2000s, when Walt Disney Co. acquired ABC, Viacom bought CBS, Time Warner combined with AOL, and GE snapped up Universal Studios and Vivendi’s profitable cable channels. Although the track record for those deals is mixed, Comcast executives believe they have the skills and resources to make it work.

“I am somewhat skeptical that more content together with more conduit is going to be the right business model,” said Kevin Werbach, a professor at the University of Pennsylvania’s Wharton School. “But Comcast has been a phenomenally successful company and they have been able to pull off substantial acquisitions before. I would not bet against them.”