NBC Universal to Sell Back its 15.8% Stake in A&E for $3B

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NBC Universal to Sell Back its 15.8% Stake in A&E for $3B

NBC Universal, a subsidiary company of Comcast Corporation (NASDAQ:CMCSA), one of the leading provider of entertainment, information and communication products in the United States agreed to sell its 15.8 percent stake in A&E Television Networks for $3 billion.

Last May, Comcast Corporation revealed that it is negotiating with the major owners of A&E regarding its plan to sell back  its interest in the company.

According to the filings submitted by the company with the Securities and Exchange Commission, Walt Disney Co. (NYSE:DIS) and The Hearst Corporation, current co-owners of A&E  agreed to buy back the 15.8 percent stake from NBC Universal. This means that Walt Disney Co. and Hearst will each hold 50 percent interest in A&E after the transaction. According to reports, there is a possibility that the companies will pay in cash or a combination of cash and a note.

According to the New York Times Media Decoder, A&E Networks is considered one of the most valuable ‘properties’ in the entertainment industry. Based on the transaction, the company is worth approximately $20 billion. The network generates an estimated annual income of around $1.4 billion. The transaction looks a bit pricey at fourteen times net income.

Over the previous years, A&E recorded a strong growth and some of its shows including the mini-series Hatfields and McCoy became hits among viewers.

A&E Networks Television was established in 2009 after the merger of the A&E and Lifetime channels, wherein NBC Universal serves as a junior partner with the right to buy back its interest in the company.  The History channel is also part of the A&E network, and based on the second quarter survey conducted by Nielsen, it is the third most popular basic cable network among viewers with 2.52 million viewers during prime time. A&E ranked 7th among adult viewers 18 to 49 years old, while Lifetime ranked 7th among women viewers in the age bracket 18 to 49. The survey indicated that three cable channels gained viewership this year compared with last year’s survey.

Comcast acquired its interest in A&E Networks last January 2011 after purchasing a 51% stake in NBC Universal from General Electric Company (NYSE:GE) for $13.8 billion. Some analysts speculate that Comcast is selling its stake in A&E to be able to buy additional stakes in NBC Universal.  GE is allowed to sell its remaining 50 percent interest in NBC Universal by June 2014.

The transaction is subject to regulatory approvals and it is expected to close  before the end of  2012.

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