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By Jeremy Glaser | 12-03-2009 10:56 AM

Static in the Comcast-NBC Universal Deal

Our take on the deal price, strategic merit, and possible impact on the media industry.

Securities mentioned in this video
GE General Electric Co
CMCSA Comcast Corp

Jeremy Glaser: I'm Jeremy Glaser from Morningstar.com. Comcast this morning finally announced its intention to purchase a majority stake of NBC/Universal from General Electric.

Here to discuss the impact for Comcast shareholders, as well as the potential impact on the broader media landscape, is associate director Mike Hodel. Mike, thanks for joining me.

Michael Hodel: Thanks for having me, Jeremy.

Glaser: So do you think that this was a smart move for Comcast?

Hodel: Well, strategically, we do think there are some benefits to Comcast owning content, but where we're really focused, in terms of this deal, is on the price that Comcast ended up paying for NBC/Universal.

The $30 billion value that they assigned to the assets that GE is contributing looks a bit rich to us. It's about 10 times operating income ex depreciation and amortization, which is high for the industry. It's about two times higher than a Disney or a Viacom.

Right now we think, Disney, Viacom, those types of companies, are pretty fairly valued in the marketplace, and we don't think they offer a significant margin of safety. Especially important right now, given the way that media consumption is changing, consumer habits are changing, with respect to how people consume and purchase content.

So there's a lot of uncertainty with respect to what these businesses are going to look like over the long term. So we think it's important to have a margin of safety, relative to any estimate of fair value.

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