December 3, 2009
In Secret Meetings, Comcast Wooed G.E. and Won NBC
By ANDREW ROSS SORKIN and TIM ARANGO
The secret meeting was set for an early July afternoon in a condominium along the ninth hole of a golf course in Sun Valley, Idaho. Jeffrey R. Immelt, General Electric’s chief executive, arrived first, taking care to avoid being spotted by his own employee, Jeff Zucker, the chief executive of NBC Universal, who was mingling with other executives nearby.
Ralph J. Roberts, the 89-year-old co-founder of the cable giant Comcast, and its chief operating officer, Steve Burke, arrived 15 minutes later.
The gathering, which had been brokered by James B. Lee Jr., a vice chairman of JPMorgan Chase, was set up for one purpose: Mr. Immelt, who had resisted the urge to sell NBC for years, was finally ready to sell. For months, he had been in discussions with Mr. Roberts’s son, Brian, Comcast’s chief executive. But now, at the investment bank Allen & Company’s annual media conference — known for big deal-making — he wanted to hear it from the mouth of the company’s patriarch.
“Do you want to do this?” Mr. Immelt, dressed informally in a polo shirt, asked Mr. Roberts, who was wearing his trademark bow tie, and Mr. Burke, who was Mr. Immelt’s classmate at Harvard Business School.
“Yes,” Mr. Burke said.
Mr. Roberts, who founded Comcast in Tupelo, Miss., in 1963, said: “I’ve done a lot of deals in my life. Every deal has its time. This is the right time.”
On Thursday, G.E. is planning to finally announce what had leaked more than a month ago: it is selling a controlling stake in NBC Universal to Comcast, a deal that will once again reshape the media landscape.
The transaction, the largest during Mr. Immelt’s tenure as chief executive, will also reshape G.E., refocusing it into an industrial and financial conglomerate without the flash — and financial instability — of a television and film business. And in the process, he has been undoing much of the legacy of his predecessor, John F. Welch Jr.
The deal was a long time in the making and was filled with meetings at the Four Seasons hotel in Philadelphia, in New York City apartments and on helicopter rides. It also featured code names: G.E. was Green, NBC was Navy, Vivendi was Violet and Comcast was Crimson (because of the Harvard link).
More than a half-dozen executives involved in those discussions, speaking on the condition of anonymity because the deal had yet to be formally announced and because the negotiations were considered confidential, helped reconstruct a nearly yearlong dance between G.E. and Comcast.
Mr. Roberts had long wanted to control not just the pipes into people’s homes, but the television shows and movies that flow over them. But since 2004, when he sought and failed to buy the Walt Disney Company, the media industry’s economics had cratered. Broadcast television was suffering through ratings declines, and a falloff in DVD sales had dented profits in Hollywood. But cable channels, of which NBC Universal has many, were flourishing.
The prospect of a deal with G.E. began in earnest in the late afternoon on March 3 on the 48th floor of JPMorgan, when Mr. Roberts and Mr. Burke came to meet with that firm’s chief executive, Jamie Dimon, at the behest of Mr. Lee.
The meeting began with a general discussion of Comcast’s finances, but Mr. Roberts said the company did not need a bank to raise money. Instead, he changed direction by saying he had been pursuing Mr. Immelt about NBC but felt like he was getting nowhere. He felt that G.E. was in a vulnerable position and highlighted the fact that when NBC acquired the Weather Channel earlier in the year, it partnered with private equity instead of buying the network on its own. It was a sign, Mr. Roberts believed, that Mr. Immelt might not be fully committed to the television business. Mr. Lee said he was having breakfast the next morning with Mr. Immelt and agreed to mention Comcast’s interest.
A day later, Mr. Roberts was standing in the lobby of a Marriott hotel in Baltimore, where his daughter was playing in a squash tournament, when Mr. Immelt called his cellphone.
“I want you to know that I’m going to study this,” Mr. Immelt told Mr. Roberts. The two agreed that measures should be taken to ensure secrecy and that only a handful of executives should be informed. Mr. Roberts, who had the failed hostile takeover bid for Disney behind him, had one requirement: he said he would not participate in an auction.
“We’ve got to be monogamous,” he said.
Mr. Immelt’s evolution in thinking about NBC had come over the last year as his company’s fortunes were battered during the financial crisis. In the weeks after Lehman Brothers’ bankruptcy, Mr. Immelt had spent many hours on the phone with the Treasury secretary, Henry M. Paulson Jr., worrying about the conglomerate’s fate.
In the beginning of 2009, as the stock market continued to plunge and G.E. hovered as low as $5.87 a share, Mr. Immelt listened to presentations about its assets at a management retreat, where his thoughts began to crystallize. NBC Universal, whose cable channels continued to do well but whose flagship broadcast network was deteriorating, no longer appeared to be core to the business and he thought his capital could be redeployed better elsewhere.
Comcast had also undertaken an internal review to consider where the company could grow by acquisition. It considered buying another cable company, a mobile phone company or even Facebook. At one point, it considered acquiring Viacom, which owns several cable networks but is unencumbered by a broadcast network, but Sumner M. Redstone, the controlling shareholder in Viacom, was not interested in selling.
As the spring wore on, G.E. and Comcast met repeatedly, trying to come up with a structure for the deal. By August, the broad points, in which Comcast would acquire 51 percent of the company, with G.E. holding 49 percent, were agreed upon. G.E. can begin selling its remaining stake back to NBC three and a half years after the deal closes at a 20 percent premium to the market value. However, it would have to share 50 percent of any increase in the value of NBC with Comcast.
The deal nearly fell apart several times. Once, when it seemed that it had been derailed over price and structure, Michael J. Angelakis, Comcast’s chief financial officer, flew to the summer home of Keith S. Sherin, G.E.’s chief financial officer, in Cape Cod and took him and his wife out to dinner to put the deal back on track. By the end of dinner, they had shaken hands.
The largest complication was that Vivendi, the French conglomerate that owned 20 percent of the company, could force G.E. to pursue an initial public offering if they could not come to terms on a deal.
Even within the last two weeks amid a constant stream of leaks, it appeared the deal could collapse. Vivendi wanted to value the business at $6.1 billion; G.E. wanted to value it at $5.5 billion. They ended up at $5.8 billion, but there was still a worry about what would happen if G.E.’s deal with Comcast were blocked by regulators.
Mr. Immelt, after attending the state dinner last month at the White House, flew to Paris to persuade Vivendi to complete the deal. An agreement was reached over the weekend after he offered to pay Vivendi $2 billion even if the Comcast deal collapsed.
For nearly six months, only a small cadre of G.E. and Comcast executives knew about the deal — nobody at NBC was ever told — and it had not leaked. On Sept. 30, several hours after the talks were disclosed to a tiny group of executives at NBC, the blockbuster talks appeared on TheWrap.com, a Hollywood news site.
“I’m telling you to be prepared for this to leak,” Mr. Sherin had told Mr. Angelakis earlier that day.