December 3, 2009 / 9:22 PM / 10 years ago

Comcast-NBC deal could spur more M&A

NEW YORK (Reuters) - Comcast Corp’s (CMCSA.O) plan to take a controlling stake in NBC Universal has spurred many behind-the-scenes conversations, but whether any will result in actual deals depends on the outcome of a regulatory review that could take months.

Comcast on Thursday announced its deal to buy a 51 percent stake in NBC Universal from General Electric Co (GE.N). GE will eventually sell the remaining 49 percent to Comcast, giving it full control of a rich array of programing and content, including Universal Studios.

The deal will reshape the media industry by bringing Comcast — the top U.S. cable distributor and leading Internet service provider to homes — under the same umbrella as NBC Universal, owner of cable TV networks like Bravo and CNBC.

U.S. regulatory scrutiny is expected to be heavy, and the deal could take more than a year to be cleared.

Media dealmaking could pick up if regulators impose minimal conditions on the NBC Universal transaction, said Brette Simon, a mergers and acquisitions partner at law firm Jones Day.

“If the deal goes through in some measure, I think it will absolutely drive more content-driven deals,” Simon said. Rivals will have to take stock of their position and consider what strategic alternatives would make sense for them, she added.

Media industry watchers have called the deal a game-changer for Comcast, which will now have control over the programing it distributes through its cable and Internet operations, and potentially command better terms from advertisers.

But the deal will also have wider implications for the media industry, which is grappling with the challenges of making money off consumers who increasingly get their news and entertainment online or on the move.


Cable and satellite operators, including Time Warner Cable TWC.N, DirecTV DTV.O, Dish (DISH.O) and Charter Communications CHTRa.BE, could seek to buy media content companies, bankers and analysts said.

Last month, media mogul John Malone told the Associated Press that the NBC Universal deal would give Comcast too much market power and push rivals to consider similar deals. Malone is chairman of Liberty Media LINTA.O, which is spinning off U.S. satellite TV operator DirecTV into a separate entity.

While DirecTV could itself be snapped up in a year or two by either Verizon (VZ.N) or AT&T (T.N) as these phone companies seek to become bigger pay-TV players, the desire to own content will drive most M&A, bankers and analysts said.

Verizon and AT&T have spoken to Liberty about DirecTV, but talks fizzled over a few concerns including regulatory approval, a source familiar with the matter said. The discussions could regain traction if the Comcast-NBC deal get the regulatory green light with few conditions, bankers said.

Companies that own cable channels, movie and TV libraries, or create programing, such as Discovery Communications (DISCA.O), The CW Television Network and Scripps Networks Interactive SNI.N, could also become targets.

The potential sale of Metro-Goldwyn-Mayer, the famed and debt-ridden studio, is likely to elicit interest from many bidders, including Time Warner Inc TWX.N, News Corp (NWSA.O) and Lions Gate Entertainment LGF.N, sources have said.

“You now have ABC and Disney as a combined entity, next you could have NBCU and Comcast joining forces. Who’s next? CBS, Fox, the CW?” said a person who works on media deals.

Some media companies have already approached investment bankers to assess their balance sheets and business models, and figure out if they can compete with the Comcast-owned NBC Universal, said a source familiar with these discussions.

These people spoke anonymously because many of these discussions are confidential.


In contrast to the bullishness of many bankers, media industry executives have mixed feelings about the impact of the deal on the industry.

IAC/InterActiveCorp IACI.O CEO Barry Diller called the deal a “real shift” that will have a profound effect on the media industry in the next few years.

But Time Warner Cable Chief Executive Glenn Britt debunked the idea that his company would seek a similar deal. Merging content and distribution brings no operating benefits, which is why Time Warner spun off its cable operations, he said.

“What people do at Warner Bros. everyday are very different than what I do... the businesses are very different. So you really can’t operate them together.”

Christopher Vollmer, a partner at Booz & Co who specializes in media and entertainment, said the industry has been active in dealmaking this year, referring to The Walt Disney Co’s (DIS.N) $4 billion purchase of Marvel Entertainment Inc MVL.N and Scripps Networks’ acquisition of Travel Channel.

The Comcast-NBC deal will lead to more activity but “is unlikely to be a catalyst for similar types of large-scale deals that bring together content and distribution,” he said.

“Where we do see more media M&A action ... is toward higher growth areas such as video games, advertising/marketing services and related technologies, Internet, and, perhaps, the few remaining cable network groups that are not part of a major conglomerate,” Vollmer added.

Reporting by Anupreeta Das and Jui Chakravorty, editing by Tiffany Wu and Matthew Lewis

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