Comcast to spinoff select NBCUniversal’s assets into a new public company

Comcast Corporation (NASDAQ:CMCSA) will pursue a tax-free spinoff of NBCUniversal’s portfolio of TV channels and list them on to a separate public company, the company confirmed in a public statement Wednesday after the media and cable giant hinted at divesting them on their third quarter earnings call last month.

On the earnings call in October, Comcast executives said the company was struggling to navigate the deteriorating landscape for cable in the U.S., just like its peers, and implied at exploring options for its networks.

Comcast disclosed that the new entity will cover news, sports, and entertainment content and include USA Network, CNBC, MSNBC, Oxygen, E!, SYFY, and Golf Channel; among digital assets, it will have Fandango and Rotten Tomatoes, GolfNow, and Sports Engine, reaching potentially 70M households in the U.S.

“This transaction positions both SpinCo and NBCUniversal to play offense in a changing media landscape,” Comcast president Mike Cavanagh said in the statement. 

The new company will be helmed by Mark Lazarus, who currently chairs the board at NBCUniversal Media Group. Current CFO of NBCUniversal Anand Kini will become the finance chief and COO of the new entity.

"In our opinion, a standalone spinoff of the cable network business makes little financial sense and could be motivated by a desire to overcome regulatory hurdles for potentially larger deals in cable," analysts at Barclays said in their immediate reaction to the news.

"Frankly, the spin-off appears highly desirable from the vantage points of detaching the albatross to overall growth rate arising from the cable network business as well as streamlining management," Benchmark analysts wrote in their November 20 note.

Benchmark analysts said they were more skeptical that the new cable network businesses would be any healthier on their own and were not surprised by the decision in hindsight. 

The transaction is expected to be completed in about one year, and the new entity will have the same dual-class share structure as Comcast.

CMCSA shares are up nearly 2% in premarket trading on the Nasdaq.

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