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/ 10.01.2009 4:00PM
Comcast Shares Sink on NBCU Speculation
NEW YORK:
Shares of Comcast dropped around 7 percent today on speculation the cable
operator might buy NBC Universal from General Electric. Wells Fargo Marci
Ryvicker said the deal would make sense as far as the cable assets were
concerned, but the broadcast network would be a red-headed stepchild.
“In our view, an acquisition of NBCU makes sense as it relates to the cable
networks,” Ryvicker said. “But the other assets--broadcast network, the O&O
stations and the theme park units--do not.”
Steve Burke, Comcast’s chief operating officer, has talked about diversifying
the company’s assets, which now comprise 95 percent distribution and 5 percent
content, Ryvicker said.
“That being said, Mr. Burke also stated that the company is not looking to make
a ‘$50 billion acquisition’ --although we believe that NBC Universal is worth
well below that,” she said. “CNBC is reporting that the potential transaction
between Comcast and GE would entail the spin-off of NBCU into a private company
with Comcast taking a 51 percent ownership stake. Should this happen, Comcast
would be on the hook for $13 billion.”
Wells Fargo considers $13 billion preferable to the likely full price of NBCU
of around $35 billion.
“While the company is not commenting, other than to say that speculation of a
finalized $35 billion acquisition of NBCU is untrue, we do think that Comcast
and GE are in the valuation process,” Ryvicker said. “The stock is likely
to remain under pressure until there is a formal announcement from either
company as to the structure and size of what’s to come.”
Comcast (NASDAQ: CMCSA) dropped 7 percent to around $15.70 in trading today; GE
(NYSE: GE) dipped just under 3 percent to a few pennies below $16.
“Once the uncertainties are ironed out, we expect the stock to recover somewhat--although
investors married to the free cash-flow story may flee to a relatively ‘safer’
company, such as Time Warner Cable, which has repeatedly stated its desire to
stay out of the M&A market and use its excess cash to delever and return
money to shareholders via a dividend,” Ryvicker said.
Wells Fargo remains neutral on Comcast.
-- Deborah D. McAdams
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