Comcast has made its long awaited play for NBC Universal, agreeing to form a joint entertainment venture with General Electric granting Comcast 51% ownership and 49% to General Electric managed by Comcast.

The entity will comprise the NBC Universal businesses and Comcast’s cable networks, regional sports networks and certain digital properties and certain unconsolidated investments.

Jeff Zucker (pictured) will lead the New York-based venture as CEO, reporting to Comcast COO Steve Burke. The deal values at $30bn the NBC Universal businesses, which comprise Universal Pictures, its active slate and library, and a portfolio of cable networks.

Comcast will contribute business valued at $7.25bn and will make a payment of $6.5bn in cash to General Electric certain to adjustments prior to closing. The NBC Universal networks include USA, Bravo, Syfy, CNBC and MSNBC and combined with Comcast’s network roster of E!, Versus, Golf Channel and ten regional sports networks will account for 80% of the new entity’s cash flow.

“This deal is a perfect fit for Comcast and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding,” Comcast chairman and CEO Brian Roberts said,

“In particular, NBCU’s fast-growing, highly profitable cable networks are a great complement to our industry-leading distribution business. Today’s announced transaction will increase our capabilities in content and cable networks. At the same time, it will enhance consumer choice and accelerate the development of new digital products and services.

“The combination of Comcast’s cable and regional sports networks and digital media properties and NBCU will deliver strong returns for GE shareholders and business partners,” General Electric chairman and CEO Jeff Immelt said. “NBCU has been a great business for GE over the past two decades. We have generated an average annual return of 11%, while expanding into cable, movies, parks and international media.

“We are reducing our ownership stake from 80% to 49% of a more valuable entity. By doing so, GE gets a good value for NBCU. This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain.”

Comcast also announced the creation of Comcast Entertainment Group (CEG), which will house Comcast’s interest in the joint venture and will stand alongside Comcast Cable, which operates the company’s traditional cable business.

The joint venture board will have three directors nominated by Comcast and two nominated by General Electric.

Morgan Stanley is lead financial advisor to Comcast with UBS and BofA Merrill Lynch acting as co-advisors. Davis Polk & Wardwell LLP is Comcast’s legal advisor. JP Morgan is lead financial advisor to GE with Goldman Sachs and Citi acting as co-advisors. Weil, Gotshal & Manges LLP is GE’s and NBCU’s legal advisor.

Key Elements Of The Transaction:

  • NBCU will borrow approximately $9.1bn from third-party lenders and distribute the cash to GE.
  • NBCU, valued at $30bn, will be contributed to the newly formed joint venture. Comcast will contribute its programming businesses and certain other properties valued at $7.25bn.
  • GE will acquire Vivendi’s 20% interest in NBCU for $5.8bn. GE will purchase approximately 38% of Vivendi’s interest (or approximately 7.66% of all outstanding NBCU shares) from Vivendi for $2bn in September 2010, if the Comcast transaction is not closed by then. GE will acquire the remaining 62% of Vivendi’s interest (or approximately 12.34% of all outstanding NBCU shares) for $3.8bn when the transaction closes.
  • Comcast will make a payment to GE of approximately $6.5bn in cash subject to certain adjustments based on various events between signing and closing.
  • The new venture will be 51% owned by Comcast and 49% owned by GE.
  • GE expects to realise $9.8bn pre-tax in cash before debt reduction and transaction fees and after buyout of the Vivendi stake. GE expects to realise approximately $8bn in cash after paying down the existing NBCU debt and transaction fees.
  • GE will be entitled to elect to cause the joint venture to redeem one-half of its interest at year 3 ½ and its remaining interest at year 7.
  • To the extent the joint venture is not required to meet GE’s redemption requests, Comcast will provide a backstop up to a maximum of $2.875bn for the first redemption and a total backstop of $5.750bn.