Liberty Media chairman John Malone said NBC Universal parent General Electric has instructed its adviser Goldman Sachs to “listen, but not talk” to other parties concerning the still-in-negotiations NBCU-Comcast deal.
Malone, speaking to a rapt group of reporters and investors prior to taking the stage at Liberty’s annual investor meeting here last Friday, said he believes GE (which owns 80% of NBCU) is not soliciting alternative bids for the media firm.
He also said that if Comcast can pull off such a big content acquisition — which would include a broadcast network and a studio — without severe regulatory limitations, Liberty-controlled DirecTV and other distributors would be looking for ways to “go vertical.”
“They just want to understand how people view this deal,” Malone said of GE and its advisers. Malone has long been known as a media executive who sees the value of owning both content and distribution assets.
Comcast and NBCU have been negotiating for weeks, according to people familiar with the situation. The top U.S. cable operator has proposed a deal that would give it 51% control of an entity including NBCU and Comcast’s own cable content assets. Comcast also would purchase French conglomerate Vivendi S.A.’s 20% interest in NBCU for about $6 billion. It is expected that Comcast would buy out GE’s 49% interest in the partnership over time.
Malone would not give any details about the “one-way discussion” Liberty held with Goldman, but he did say he would be interested in getting involved in NBCU at the right price.
As for what the right price would be, he said it would be more like a seven times “real cash flow” multiple for Vivendi’s 20% interest in NBCU and an 11 times multiple for the entire deal. That is about the same price that Comcast and chairman and CEO Brian Roberts placed on the combined company.
“Which may be completely phony,” Malone said of the valuation. “But it allows Brian to put in his stuff at an artificially high multiple and justifies paying Vivendi enough to get rid of them. I think that’s the mechanics of this deal.”
Liberty has been named as a possible suitor for NBCU ever since it was revealed that the assets were in play.
While Malone did not seem interested in trumping Comcast’s bid for NBC Universal at current prices, he added that if the deal passes regulatory muster, it could force his DirecTV distribution arm to seek out broadcasting deals.
Malone praised Roberts for engineering what looks like another stellar deal for the MSO. “Brian is the logical counterpart. It’s really a good opportunity for Brian without betting the farm,” he said.
But he added that if the Comcast NBCU deal goes through without restrictions, it could set the stage for more big media deals.
“If the government allows this big a horizontal/vertical transaction without restrictions on the ability of Comcast to use their market power to create value in content, I think every large distributor really needs to look hard at doing the same thing,” Malone said.
Malone said that DirecTV, in which Liberty owns a 58% interest, would be among those companies that would be on the hunt for broadcast and other content companies.
Later, in a Q&A session on stage, Malone said that his former company — Tele-Communications Inc. — built its business in part on leveraging its distribution power by investing in, creating and carrying content companies.
“I’ve always believed that the power of distribution combined with the ability to distribute content creates quite a bit of value,” Malone said. “Over the years, that has been diminished by regulatory limitations. It will be interesting to see if Comcast can do this without a lot of restrictions. If they are to get this through, every major distributor will be looking at opportunities to go vertical. It’s a pretty straightforward way to create value.”
Another method of creating value for Liberty has been the creation of tracking stocks, and during the meeting, CEO Greg Maffei said planned trackers Liberty Entertainment and Liberty Starz are on track to be completed next month.
Liberty Entertainment will include the media giant’s 58% interest in satellite TV company DirecTV Group and Liberty Starz will include its 100% interest in premium network Starz Entertainment.
At the investor meeting Maffei said that a shareholder vote for the Liberty Starz spin will likely happen in November.