BOSTON News that General Electric Co is selling its remaining stake in NBC Universal to Comcast Corp earlier than expected may be just what the largest U.S. conglomerate needed to get out of the penalty box.
Its shares rose 3 percent in postmarket trading to levels not seen in normal trading since October 2008 - when Chief Executive Jeff Immelt was forced to cut GE's dividend and sell additional shares amid fears that the financial crisis would wreck the future of GE Capital and perhaps the whole company.
The NBC deal, worth $16.7 billion, is part of Jeff Immelt's campaign to refocus the world's largest maker of jet engines and electric turbines on its industrial roots, as it exits media and scales back its GE Capital finance arm.
The company also said it would buy back $10 billion of its shares this year - roughly 4 percent of its market capitalization - and raise its total authorized stock buyback to $35 billion from $25 billion.
If GE's shares trade above $23.18 on Wednesday, they will be at their highest since October 2008. They passed that mark in postmarket trading on Tuesday hitting $23.34.
During the depths of the financial crisis, GE shares had dipped below $6.
"We have been looking forward to them moving away from that NBC Universal, and this will give them more capital," said Mike McGarr, a portfolio manager at Becker Capital Management in Portland, Oregon, which holds GE shares. "In the end they will get back to what GE used to be and probably with higher margins."
The higher stock buyback will get Immelt closer to his goal of reducing the company's total outstanding share count to its level before the company sold $15 billion in additional shares to investors including Warren Buffett's Berkshire Hathaway Inc during the crisis.
GE executives have repeatedly said they do not anticipate a repeat of the $11 billion wave of acquisitions the company embarked on in 2010 and 2011 to bulk up in the energy sector, which it funded with proceeds of the initial NBC deal.
"The core business that they have at the moment is fairly solid," said Morningstar analyst Daniel Holland. "What I would look for them to do is repurchase shares."
GE's initial 2010 deal to sell NBC Universal to Comcast had given it the option of selling the rest of its holdings to the No. 1 U.S. cable company in two stages, part in mid-2014 and the balance by the end of 2017. GE officials had said they were interested in selling the rest of the stake earlier rather than later.
LIVE FROM NEW YORK NO MORE?
In addition to the proceeds of selling the remainder of NBC - a deal expected to close by the end of the first quarter, more than a year earlier than investors had expected - GE is selling NBC-occupied floors at 30 Rockefeller Center to Comcast for $1.4 billion.
Built as the RCA Building in 1933, the 70-story building is the focus of the Rockefeller Center. It was renamed the General Electric Building in 1988 after GE required RCA, which it helped found in 1919. The building is home to the famous Rainbow Room club restaurant. Tishman Speyer co-owns the building.
The floors GE is selling include the studio where "Saturday Night Live" is produced, where Immelt and his top lieutenants have conducted the company's annual December outlook meetings. GE spokesman Seth Martin declined to comment on where GE would hold this year's meeting.
Immelt, who has run GE since 2001, has repeatedly emphasized to investors that the company would have a lot of cash to deploy in the coming years, reflecting both the NBC deal and Federal Reserve approval last year for GE Capital to resume paying a share of its profit back to the parent company.
"This company is going to have a ton of cash over the next three years," Immelt told investors in January. Immelt is scheduled to discuss the deal on a conference call Wednesday morning.
Oliver Pursche, president of Gary Goldberg Financial Services, which holds GE shares, said the higher buyback was welcome news.
"Additional share buybacks are likely to be positive for shareholders," Pursche said. "The M&A space right now has gotten a little expensive."
(Additional reporting by Ilaina Jonas in New York; Editing by Bernard Orr)