Let’s get this out of the way first: Comcast co-CEOs Brian Roberts and Mike Kavanagh told Wall Street analysts on Monday that the proposed bid for NBCUniversal is “not at all” about putting every aspect of the company up for sale.
In fact, their argument is that a split would give each company a stronger hand to play to cut deals or expand, and divide the debt load accordingly.
But that’s not stopping Wall Street from salivating over what comes next. Deals may not happen in the next year or two (for tax purposes, if nothing else), but analysts see potential mergers and acquisitions for both the communications and media and entertainment businesses.
As Wolfe Research analyst Peter Supino wrote on Monday: “We doubt such a spin-off will occur. Instead, we expect one or both Comcast units to merge with peers or competitors. We believe the spin-off plan is strategic for Comcast because it is a legitimately good idea and also strengthens Comcast’s negotiating position with partners who will not want to wait 1-2 years for the ‘season’ to be completed for tax purposes.”
less, Hollywood Reporter It explains the origins of each side of the split, and which companies could pursue trades.
NBCUniversal New
NBCU will be led by CEO Mike Kavanagh following the spin-off, and will include NBC, Peacock, Bravo, Telemundo, NBCU’s film and television studios, its global theme park business, and the company’s Sky division in Europe (which includes some business lines).
While NBCU will be a pure media company, it will still have some linear baggage at NBC, Bravo and Telemundo, which could dissuade some potential dealmakers.
Who might be a buyer for the new NBCU?
The market may seem frothy for media and entertainment, but regardless of Warner Bros.’ high-profile pursuit, Discovery, there haven’t been a lot of deals for studios or streaming companies (Roku is a platform, after all).
Netflix: The obvious name came to an end after its pursuit of WBD with the streaming giant folding its hand in favor of David Ellison’s Paramount. Rumors have been circulating for months that Netflix might look to originals like NBCU in its quest for growth. Although the intellectual property is not as strong as WBD, it is better than Netflix’s existing holdings, and the experiments could change the narrative around Netflix’s growth, especially with experimental shows that seem to be in demand right now.
However, Netflix co-CEOs Ted Sarandos and Greg Peters have largely dismissed any major deals since WBD, citing it as a one-time opportunity. But if Netflix wants a game-changing IP deal, NBCU could fit the bill… though it might require divesting the linear assets it still holds.
Amazon: The tech giant is media-hungry, pouring billions into Prime Video, and has pursued intellectual property deals, as it did with MGM Studios. NBCU’s sports rights are exceptionally strong (NFL Sunday Night Football! NBA! Olympics!) and could bolster its efforts to become one of the top players in streaming.
Amazon was also willing to do a small deal with linear assets, and invest in the Yankees’ YES Network, if it acquired the company’s programming. But in the AI arms race, is Amazon really seeking media assets if they come at the expense of Nvidia chips or computing power? This is less clear.
Disney/Paramount/Fox: Look, there are strategic reasons why each of these companies would do a deal: Josh D’Amaro may want to create his own mark as a game-changing dealmaker; Lachlan Murdoch may want the same thing, which is to expand Fox’s content reach as it expands into technology with Roku; David Ellison may want to consolidate another major studio and become the dominant force in entertainment.
But the truth is that all of these deals are difficult to understand, given the difficult legal road involved in streaming rules, the already tight market, and the realpolitik involved. The debt burden required for such a deal may be too much for any legacy media company to handle, given the debt it has already incurred for the mega deals it seeks or has sought to achieve.
Private equity/wild card: Private markets are full of cash, and this money is particularly interested in things like sports business. The glamor of the film and television business doesn’t hurt either, nor does it affect growing experiences. It’s not crazy to think that Apollo or Providence Equity could find a partner or two and pursue a deal, betting that they can execute on the growth strategy.
What if the new NBCU is a buyer? With the split, “we now have the freedom to explore adjacent companies where we have the right to play,” Kavanagh told Wall Street analysts. This certainly positions NBCU as a buyer, not a seller.
Video games are an interesting prospect: Will NBCU consider a deal for Interactive Take-Two gameor Roblox?
Kavanagh is also said to be particularly optimistic about the trials, and that could lead to some interesting deal possibilities: perhaps a flounder Six flags Could it become a national home for NBCU-branded intellectual property and attractions? Maybe there could be a cruise line to catch up with Disney? maybe Sony or Lionsgate Could they become takeover targets to try to catch up to the larger Paramount and Netflix? There appear to be real opportunities, if Kavanagh pursues them.
New Comcast
The post-split Comcast will be led by CEO Michael Angelakis and will include Comcast’s broadband Internet businesses, its wireless communications businesses and its cable TV businesses. Comcast is also supposed to own Spectator, which owns Xfinity Arena in Philadelphia, the Philadelphia 76ers, as well as ad technology business FreeWheel.
Notably, post-spin Comcast will also own a 19.9 percent stake in the new NBCUniversal, “which it intends to monetize in a tax-efficient manner over time.” In other words, a significant portion of NBCU will be sold to help eliminate leverage.
Who might be a buyer for the new Comcast?
There are two obvious plays here: an expanding national cable company, a PE play, or an offshore telecom company seeking to become a telecom giant.
SpaceX: Elon Musk has big ambitions for SpaceX (after all, his company told investors in its IPO that “we believe we have identified the largest addressable market in human history”), and connectivity is a big part of that story. Starlink is growing rapidly, and Comcast not only has wireless spectrum that can help that business, but also has a terrestrial broadband business that can complement it. However, AI commerce is at play here: SpaceX has closed multi-billion-dollar deals for AI companies like Cursor, and will likely need a lot of Nvidia chips and other hardware to build its planned massive data centers in space, so Comcast is probably just a little too legacy for its tastes.
Charter: The cable TV giant is already close to a deal to complete its acquisition of Cox, making it the largest cable company in America. Acquiring Comcast would effectively make it the national cable company, giving it massive terrestrial reach to try to compete with SpaceX and the telecom giants. But Charter already has more debt lined up in its Cox acquisition, and Comcast’s regulatory process would be a nightmare to break up (at the state level, if not federal level), so the juice probably isn’t worth the squeeze.
Verizon/AT&T/T-Mobile: Depending on who you ask, any of the wireless giants could be an acquisition target for SpaceX… or a buyer to expand and compete with them. All three have broad reach in wireless (where Comcast still needs work) and a desire to expand broadband for home and business (where it’s already a strong player). You need Verizo n in particular is due for a shake-up given its recent CEO change, and creating a telecom giant could be its ticket. Of course, again, regulations can be strict, and debt can be an issue… but these are downsides to any deal this large, and telcos may be thirsty enough to accept them.
Private equity: TPG has acquired DirecTV and is milking the satellite TV giant for every ounce it can get. Comcast’s strong recurring revenue could be an attractive target for a private equity firm seeking cash flow. It will take a healthy amount of debt for an LBO, but the revenues can be very attractive to make it worthwhile.
Brian Roberts corner
One of the underappreciated parts of Monday’s announcement is that Brian Roberts, co-CEO of Comcast (along with Kavanagh) and son of Comcast founder Ralph Roberts, will not be CEO of either company. The company says he will remain closely involved in both companies, and the deal includes dual-class voting shares that maintain Roberts family control of both entities.
This means that any deal would need to be approved by Roberts, which could raise the premium that PE would play. After all, Ellison had to convince Shari Redstone to give up her family’s prize. Maybe Roberts will need some convincing too?
