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General Electric Co. (NYSE: GE) cleared the way for Comcast Corp. (Nasdaq: CMCSA) to take control of its NBC Universal unit yesterday (Tuesday) when it reached agreement with Vivendi SA to buy the French company's 20% stake for $5.8 billion.
GE Chief Executive Officer Jeffrey Immelt and Vivendi Chief Jean-Bernard Levy agreed on a price after they met in France last week, according to multiple sources cited by Reuters and Bloomberg News.
A deal with Vivendi would allow GE, which owns 80% of NBC Universal, to create an entertainment joint venture controlled by Comcast, the largest U.S. cable company, while giving Vivendi extra funds for expansion, primarily in emerging markets.
GE was forced to sweeten the pot with more money than analysts had expected and Vivendi wrestled other concessions from the U.S. conglomerate that protect it in case Comcast's control of NBC Universal doesn't pass regulatory review.
"From Vivendi's point of view, the good news is that this effectively leaves them to go back to their investors and say they were able to monetize a minority stake at a good level," Claudio Aspesi an analyst at Sanford Bernstein in London told Bloomberg. "That's the best management can be expected to do."
Meanwhile, GE set the stage for the joint venture with Comcast, which will initially own 51% of the new company, gaining control of NBC Universal's broadcast network, theme parks, movie studio and cable-television channels USA, Bravo, CNBC and MSNBC.
Comcast will contribute an undetermined amount of cash and its cable networks E! Entertainment, Versus and Golf Channel, people with knowledge of the discussions told Bloomberg.
The agreement is likely to determine the final valuation for NBC Universal as Comcast and GE finalize their deal, Tuna Amobi, a New York-based analyst at Standard & Poor's who covers the entertainment industry told Bloomberg. The news organization had previously reported the two companies valued the entertainment unit at about $30 billion.
Vivendi has been widely expected to divest itself of the NBC Universal holding, which it recently described as non-core. The Paris-based company is attempting to consolidate its main businesses, which include telecoms, music, video games and pay-TV businesses.
Just last month, Vivendi moved to increase its control of the pay-TV business by buying a 9.9% stake in Canal Plus France for $1.12 billion from French broadcaster Television Francaise, and making an equivalent offer to M6-Metropole Television SA for an additional 5.1%.
Vivendi could also decide to buy out the 20% stake in Canal Plus France held by French media group Lagardere SCA, which could cost Vivendi between $1.5 billion and $2.25 billion, according to analysts cited by The Wall Street Journal.
The deal for NBC Universal could provide Vivendi with a vital boost to its cash holdings after its recent acquisition spree.
"From a liquidity standpoint…if the group does receive $2 billion up front, this would leave it very comfortable buying in the remaining Canal Plus France minorities, which would be reasonably accretive," anonymous Citigroup Inc. (NYSE: C) analysts told Reuters.
The deal with Comcast would give Immelt cash to focus on GE's financial, health-care and industrial businesses, including the world's biggest maker of jet engines, locomotives and medical imaging machines. GE would initially have a minority stake in the NBC Universal entity, selling the rest over a number of years.
GE acquired NBC as part of a 1986 acquisition of RCA Corp. It later expanded the unit through the acquisitions of Bravo and Telemundo. GE reported on October 16 that NBC Universal suffered a 27% drop in profits for the first three quarters of 2009 from 2008.
News & Related Story Links:
Vivendi, GE Agree on NBC Price, Paving Way for Deal
- The Wall Street Journal:
Vivendi Tightens Grip on Canal Plus France
Vivendi shares rise on hopes NBCU stake sale near