A media frenzy and one major denial have arisen following the story that Comcast, the biggest U.S. cable operator, is making another high-profile run at a major media content company -- this time NBC Universal, according to one report.
Comcast Corp. has all but completed a $35 billion deal to acquire NBC Universal from General Electric -- which owns 80% of the company -- and Vivendi, which owns 20%, according to TheWrap.com.
A Comcast statement said: "While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate." NBC had no comment.
According to one media market analysis, the deal would be some 50% over the estimated value of NBC Universal. Bernstein Research says its value on NBC Universal had been in the $21 billion to $23 billion range. The Comcast price would be 10-12 times 2010 earnings before interest, taxes, depreciation and amortization (EBITDA). Right now, media deals are in the 7 times EBITDA range.
All this has other media analysts thinking the estimated price would be too much for Comcast to handle.
"I don't think a whole acquisition makes sense, thinking how [Comcast] shareholders would react," said David Joyce, media analyst for Miller Tabak. "It could be to acquire Vivendi's 20% stake, or it could involve some combination of cable nets, or right of first refusal on any future NBC sale."
Joyce also says financing for the deal might be difficult to acquire. "Credit markets have funded refinancings so far, not M&A yet."
Bernstein says what could be driving the deal is the rising programming costs seen by cable operators and other TV retailers. Much of that is coming from broadcast companies such as CBS, which are looking to increase retransmission fees from cable operators, satellite distributors and telco companies -- video distributors that air TV station signals.
The analysis suggests that a Comcast-NBC deal would drive Comcast's efforts to increase its video-on-demand services, which is Comcast's preferred choice over DVRs.
Better VOD technology and distribution would also be a positive when it comes to delivering alternative windows of theatrical movies to consumers, countering growing home entertainment kiosks, such as Redbox.
However, a Comcast-NBC deal might be a negative on NBC's interest in Hulu.com, especially as Comcast has been pushing its "TV Everywhere" efforts that will force non-Comcast cable subscribers to pay a fee to access programming.
Although General Electric has declined that NBC Universal is for sale, rumors about NBC being spun off abound. A recurrent one is that minority owner Vivendi has been strongly considering either selling its stake or doing an IPO for its part of the media company.
Such speculation has pushed GE to consider restructuring its financial involvement in NBC, possibly including buying up Vivendi's 20% equity stake.
In 2004, Comcast made a run at buying the Walt Disney Company for $66 billion; the deal was eventually rejected. After that, Comcast struck a deal with Sony Pictures Entertainment to buy MGM and its affiliate studio United Artists.