U.S. telecommunications and media corporations Comcast will spin off NBCUniversal and Sky into a separately listed company in a structural overhaul. The plan is to split the broadband and wireless businesses from the media and entertainment businesses and pursue separate growth strategies.
Comcast said on the 29th (local time) that it would spin off NBCUniversal and the European media business Sky through a tax-free spinoff to create two independent listed companies. Once the transaction is completed, Comcast shareholders will hold shares in both the surviving entity Comcast and the spun-off entity NBCUniversal.
After the spinoff, Comcast will focus on broadband internet, wireless communications, entertainment platforms, and telecommunications services for corporations. It plans to continue growing the business based on a network and fiber-optic infrastructure that connect more than 65 million households and corporations in the United States, its wireless business, and its services for corporations.
The spun-off NBCUniversal will operate as a global media and entertainment company. NBCUniversal will include Universal theme parks, Universal film and TV studios, the NBC and Telemundo broadcast networks, the streaming service Peacock, and Bravo. The European media business Sky will also move under the NBCUniversal portfolio.
The leadership team will also be reshuffled. Comcast Chairman and co-CEO Brian L. Roberts will remain involved in the management of both Comcast and NBCUniversal after the spinoff. Comcast co-CEO Mike Cavanagh will become NBCUniversal CEO after the spinoff. Michael Angelakis, former Comcast chief financial officer (CFO), will return as Comcast CEO after the spinoff is completed. Angelakis will join as a strategic adviser until the spinoff.
Roberts said, "This transaction will open a more entrepreneurial management approach and unlock numerous new opportunities for each business." He explained that CEO Cavanagh will lead the new NBCUniversal, and former CFO Angelakis will serve as Comcast CEO.
CEO Cavanagh also said Comcast will maintain its leadership in the connectivity business, and NBCUniversal, together with Sky, will have the scale, brand, content, and financial resources to compete as a global media and entertainment corporations.
However, the spinoff is subject to customary conditions, including final approval by the Comcast board, receipt of a tax opinion, regulatory approval, and completion of financing procedures.
After the spinoff, NBCUniversal will have the same dual-class share structure as Comcast. After completion, Comcast may hold up to 19.9% equity in NBCUniversal for up to one year and then plans to monetize that equity in a tax-efficient manner.
The restructuring is seen as a turning point for Comcast's strategy of operating combined telecommunications and media. Comcast strengthened its model of owning both content and distribution by acquiring NBCUniversal in 2011, but the media market has been rapidly reshaped recently by a decline in cable TV subscribers, intensifying streaming competition, and the spread of large mergers and acquisitions.
Reuters reported that the spinoff is meaningful in separating the highly profitable broadband and wireless businesses from the media and entertainment businesses under competitive pressure. It also said that if NBCUniversal becomes an independent listed company, it could be mentioned as a potential target in future media industry consolidation.
Comcast held an investor conference call that day and outlined the transaction structure and future strategy. The company said it would ensure that both companies have investment-grade financial structures to secure the financial flexibility to pursue their respective growth strategies.
Comcast shares surged in premarket trading immediately after the spinoff announcement. In premarket trading that day, Comcast shares traded at $28.49, up $5.32 (22.98%) from the previous session's close.