Minority Partner Could Kill Comcast (CMCSA) Deal For NBCU (GE)

GE (NYSE:GE) investors are thrilled that the conglomerate may be able to rid itself of its underperforming media unit, NBC Universal. It appears that GE is close to a deal with cable giant Comcast (NADSAQ:CMCSA) to create a joint venture to hold the entertainment company’s assets, a JV in which Comcast would be the majority partner.

NBCU is  one of the largest US media companies, but the one with the least favorable prospects. It has a network TV operation at a time when fewer and fewer people are watching network TV. It has a movie studio at a time when premium content profits are under siege by digital distribution businesses.

The minority owner in NBCU would block the Comcast deal completely. According to the LA Times, “There’s  a little-known clause in the contract between Vivendi and General Electric Co., which owns 80% of NBC Universal, that gives the French media conglomerate veto power on any change in control. ”

Vivendi could use its option to push for an extraordinarily high price for its 20% of NBCU, or it could say that it will not sell its share at all hoping for a higher offer for NBCU or a recovery of the entertainment firm’s prospects as the economy improves.

The NBCU restructuring deal has always has several hurdles to jump over including government approval. As it turns out, Vivendi may be the single biggest hurdle of all.

Douglas A. McIntyre