Comcast shares rise on deal, dividend news

Stock up more than 6% midday; GE also gains

NEW YORK -- Shares of Comcast Corp. were up more than 6% as of midday Thursday after the cable giant finally officially unveiled a deal with General Electric for a new ownership structure for NBC Universal that was the worst-kept secret in town.

Investors have long feared a big content play by Comcast, but the company surprised them
by announcing a 40% dividend boost and a commitment to finish $3.6 billion in share repurchases over the next 36 months.

The news "helped the stock and helped quiet Comcast bears," said Miller Tabak analyst David Joyce. The new 2.6% dividend yield "is not a big deal, but it is something," he said.

While acquirors usually see their stock fall on deal news, Comcast, which is buying a 51% stake in NBC Uni, saw its Class A shares trade up 6.4% at $15.89 as of 12:40 p.m. ET, while GE's stock was up 1% at $16.23. That left Comcast shares about $1 below where they closed before talk of a deal first emerged.

After the firm's failed attempt to acquire Walt Disney in 2004, Comcast shares underperformed their peers as analysts said investors had put them in the penalty box. The stock had again dropped since talk of the NBC Uni deal first emerged late on Sept. 30, when it closed at $16.88, even though the deal limits Comcast's initial cash outlays. The first day after the news of deal talks leaked, the stock fell 7.2% as concern rose that the firm may have to limit capital returns to shareholders.

Barclays Capital analyst Vijay Jayant said Thursday's deal announcement had both positive and negative elements. The financial terms are "slightly more favorable for Comcast" than expected, but the financial forecasts imply lower 2010 operating cash flow for the combined company than he had projected, he argued.

Collins Stewart analyst Thomas Eagan had recently downgraded Comcast shares from "buy" to "hold," citing lower medium-term growth prospects in the cable business and the expectation that a long regulatory review and questionable synergies of the NBC Uni deal will keep a lid on the stock in 2010.

For industrial conglom GE, the deal means the start of a slow farewell to the Peacock after 23 years of ownership as observers and company insiders increasingly question the logic of a company otherwise focused on airplane engines, light bulbs and plastics being involved in the media space.