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Comcast Wins U.S. Approval to Buy NBC Universal From GE for $13.8 Billion

Comcast Corp.’s proposed merger with NBC Universal won approval from U.S. regulators, clearing the way for the largest U.S. cable company to combine with a national broadcaster.

The Federal Communications Commission approved the transaction on a 4-1 vote, and the Justice Department followed with its acceptance of the deal, according to e-mailed statements from the agencies today. Comcast is to acquire 51 percent of a joint venture that includes NBC Universal and parts of Comcast by contributing $13.8 billion in cash and assets.

Comcast agreed to give up management control of the Hulu online-video service NBC shares with News Corp.’s Fox and Walt Disney Co.’s ABC, the agencies said. Comcast said in a blog posting it would continue to provide content to Hulu.

In a separate letter to the FCC, Comcast agreed not to interfere with subscribers’ Web traffic regardless of legal challenges to the open-Internet, or net-neutrality, rules adopted by the agency last month.

The agency said it set conditions for Comcast to share NBC programming with online rivals and traditional competitors such as Dish Network Corp. and DirecTV.

The “strong and fair merger conditions” aim to protect the emerging online-video market, FCC Chairman Julius Genachowski said in an e-mailed statement. Comcast also agreed to bring more high-speed Internet access to underserved communities, he said.

A January Close

The FCC imposed “job- and investment-harming net- neutrality provisions” said three Republican lawmakers including Fred Upton, a Michigan representative who is chairman of the Energy and Commerce Committee. They said in an e-mailed statement that Congress would examine how the agency approves mergers.

Some conditions run for three years, some for five and some for seven, David Cohen, Comcast executive vice president, said in a conference call with reporters today. “We’re comfortable with the conditions the way they’ve turned out,” he said.

Comcast expects to close the transaction by the end of the month, Cohen said.

The deal for the General Electric Co. unit would give Comcast the NBC television network, broadcast stations, cable channels such as MSNBC and USA Network, a library of more than 4,000 movies, and the part ownership of Hulu.

Concern Over Pricing

Critics had urged regulators to keep Comcast from unfairly withholding NBC shows from the expanding market for online video, and to ensure Comcast’s 17 million high-speed Internet customers have access to Web content not controlled by the company. Philadelphia-based Comcast has 23 million video subscribers.

Comcast has agreed to allow online video distributors to seek arbitration in the case of a dispute, according to a statement from the Justice Department.

The company also is banned from interfering with the transmission of online video to Comcast customers or pressuring programmers and distributors into agreements that limit access to Internet content, the Justice Department said.

Justice Department officials were concerned that Comcast would raise prices on NBC’s programs or withhold the shows from rivals such as Internet video distributors, Christine Varney, head of the agency’s antitrust division, told reporters on a conference call today.

California’s Conditions

“The merger would have enabled Comcast to harm competition,” she said. “The settlement we are announcing today ensures that the transaction will not chill the nascent competition posed by online competitors.”

A separate agreement with California prohibits Comcast from withholding or unfairly raising prices for its content for other cable companies and Internet providers, California Attorney General Kamala Harris said in a statement. California reached its settlement in conjunction with the Justice Department and the state attorneys general of Washington, Texas, Florida and Missouri, she said.

FCC Commissioner Michael Copps, a Democrat, voted against the deal, calling it “damaging and potentially dangerous.” The transaction “confers too much power in one company’s hands,” he said in an e-mailed statement.

Permanent Harm

The FCC’s conditions won’t prevent “permanent harm to competition, consumer choice and the future of the Internet,” Josh Silver, president of Washington-based Free Press advocacy group, said in an e-mailed statement. The deal will lead to higher cable and Internet-access prices, Silver said.

The new joint venture “will be well positioned to compete, innovate, and bring new choices to consumers,” Comcast Chief Executive Officer Brian Roberts said in an e-mailed statement. “This is a proud and exciting day.”

GE Chief Executive Officer Jeff Immelt said NBC Universal had generated an average annual return of 11 percent during the past 20 years.

“Reducing our ownership stake from 80 percent to 49 percent allows GE to continue sharing in NBCU’s growth while also providing significant cash to invest,” Immelt said in an e-mailed statement.

Comcast gained 6 cents to $22.78 at 4 p.m. New York time in Nasdaq Stock Market trading. Fairfield, Connecticut-based GE dropped 22 cents to $18.60 in New York composite trading.

The Joint Venture

Comcast is to pay GE $6.5 billion in cash and to contribute cable channels valued at $7.25 billion to a joint venture that will own the entertainment company. The joint venture is to include NBC Universal businesses and Comcast properties including E!, Versus and Golf Channel, the companies said in announcing the deal.

GE said in a statement today it expects about $8 billion in proceeds from the sale and a “small” after-tax gain when the transaction closes. The sale marks the end of more than two decades of ownership after GE acquired the NBC network in 1986 via its purchase of RCA Corp.

Paris-based Vivendi SA is to sell its 20 percent stake in NBC Universal as part of the deal.

Comcast was advised by Morgan Stanley, UBS AG and Bank of America Merrill Lynch, with Davis Polk & Wardwell as legal counsel. GE was advised by JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. Weil, Gotshal & Manges acted as legal advisers.

Importance of Neighborhooding

If Comcast places its news channels near one another in program listings, it must include unaffiliated news channels in the grouping, the FCC said in its summary. Bloomberg LP, the parent company of Bloomberg News, offers a TV news channel that competes with NBC Universal’s CNBC, and advocated for the requirement.

“The FCC has taken strong action to preserve independent news programming, and protect competitors against discrimination,” Dan Doctoroff, president of Bloomberg LP, said in an e-mailed statement today. “The FCC has recognized the critical importance of neighborhooding and ensuring that independent channels are treated fairly and consumers are protected.”

-- With assistance by Rachel Layne in Fairfield, Connecticut, and Joel Rosenblatt in San Francisco, California. Editors: Allan Holmes, Steve Geimann

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net and Jeff Bliss in Washington at jbliss@bloomberg.net.

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net

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