Comcast stunned investors Tuesday by disclosing its plan to buy out General Electric way ahead of schedule. It also released Q4 earnings that were expected tomorrow, and announced a 20% increase in its dividend as well as a $2B stock-repurchase plan. Comcast shares are up 7% in after-hours trading — an all-time high — while GE is up about 3%. “Our decision to acquire GE’s ownership is driven by our sense of optimism for the future prospects of NBCUniversal and our desire to capture future value that we hope to create for our shareholders,” CEO Brian Roberts says. The cable giant will finance the GE buyout with $11.4B billion of cash on hand, $4.0B of subsidiary senior unsecured notes it will issue to GE, $2.0B of borrowings, and $725M of subsidiary preferred stock it will issue to GE. In addition to the stock purchase, Comcast agreed to pay $1.4B for the NBCUniversal headquarters in New York at 30 Rockefeller Plaza as well as CNBC’s facilities in New Jersey.
Prior to the new agreement, GE could have required Comcast to buy half of its 49% NBCU stake beginning at the end of July 2014, and the remaining half beginning in January 2018.
Comcast’s Q4 earnings underscored its ability to handle the deal. It reported net income of $1.8B, +14% vs the period last year, on revenues of $15.9B, +6.%. The top line number was just a little shy of the $16B that analysts expected. Earnings at 52 cents a share excluding one-time items was just short a penny of the Street’s forecast. At NBCUniversal, revenues were up 4.8% to $6.0B while operating cash flow was up 11.4% to $1.2B — largely due to a swing at the broadcast operation to a $95M profit from a $80M loss at the end of 2011. Comcast attributes the change in broadcast to “strong primetime ratings” as well as the influx of political ads at the local stations. In Filmed entertainment, revenues rose 9% to $1.4B while operating cash flow fell 4.17% to $84M. The company says that it had to shoulder a lot of the costs for Les Miserables and This Is 40 in the quarter before revenues for the movies came in. At the cable systems, Comcast ended the year with 22M video customers, down about 7,000, while broadband subscriptions increased 341,000 to 19.4M and phone customers increased 168,000 to nearly 10M.
Comcast will brief analysts tomorrow morning. Here’s its release:
PHILADELPHIA – February 12, 2013 – Comcast Corporation (Nasdaq: CMCSA, CMCSK) announced today it will acquire GE’s entire 49% common equity stake in the NBCUniversal joint venture for approximately $16.7 billion. Also, NBCUniversal will purchase from GE the properties used by NBCUniversal at 30 Rockefeller Plaza and CNBC’s headquarters in Englewood Cliffs, NJ for approximately $1.4 billion. The acquisition accelerates GE’s divestiture ahead of a redemption period that would have begun in July 2014 and solidifies Comcast’s position as a leading media and technology company. The transaction is subject to customary closing conditions and is expected to close by the end of the first quarter of this year.
“This is an exciting day for Comcast as we have agreed to accelerate the purchase of NBCUniversal. The management team at GE has been a wonderful partner during the past two years and their support has been very valuable. Our decision to acquire GE’s ownership is driven by our sense of optimism for the future prospects of NBCUniversal and our desire to capture future value that we hope to create for our shareholders,” said Brian L. Roberts, Chairman and CEO, Comcast Corporation. “We believe the terms of the transaction are attractive and have planned for this event by taking a number of financial steps to prepare our balance sheet. We believe we are in a strong and unique position to continue to grow and build value in our combined company.”
The transactions will be funded with $11.4 billion of cash on hand, $4.0 billion of subsidiary senior unsecured notes to be issued to GE, $2.0 billion of borrowings under Comcast and/or subsidiary bank credit facilities and $725 million of subsidiary preferred stock to be issued to GE.
Morgan Stanley was financial advisor to Comcast and Davis Polk & Wardwell LLP was the Company’s legal advisor.