Comcast split could spark M&A, despite denial

Comcast split could spark M&A, despite denial

Comcast this morning rocked the media world, announcing plans to split into a pair of publicly traded companies.

  • The mechanism will be a tax-free spinoff of its media and entertainment assets, headlined by NBCUniversal and Sky.

    • State of play: The big question is what deal shoe drops next, assuming the split closes sometime next year.

  • Comcast executives poured cold water on future M&A during the analyst call, with chairman and co-CEO Brian Roberts saying "absolutely not" when asked on an analyst call if investors should view the split as a step toward future strategic transactions.

    • Zoom in: It makes sense that Roberts would want to project strength for both Comcast and NBCUniversal as standalone businesses.

  • It also rings hollow, given broader industry consolidation and the fact that everyone in charge is a veteran dealmaker.

    • Look ahead: Comcast could pursue smaller wireless or broadband providers, or go for a mega-deal with Charter (once it completes its Cox Communications merger in Q3).

  • NBCUniversal may seek to grow its content library by adding something like Lionsgate, or maybe becomes a takeover target itself. Plan B for Netflix? Is there a tech titan who's tickled by the idea of controlling cable news networks in both the U.S. and Europe?

    • What they're saying: "Both the media and telecom landscapes have become increasingly competitive, and that pace of change continues to accelerate," Comcast co-CEO Mike Cavanagh told analysts.

  • "So where we previously believed that scale and the diversification benefits warranted operating these businesses as one company, we've now simply changed our mind about that. We've now concluded that future success for each of our businesses will depend on the focus, speed and strategic flexibility that this separation will unlock."

    • Org chart: Cavanagh, whose résumé includes both JPMorgan and Carlyle Group, will lead NBCUniversal after the split.

  • Michael Angelakis, a former Comcast CFO who's currently leading private equity firm Atairos, will become CEO of Comcast. A spokesperson for Atairos says Angelakis will stick around until the split, at which point the firm will be led by Alex Evans, David Caplan, and Clare McGrory.
  • Roberts, who recently tried to buy Warner Bros. Discovery, will work with both CEOs. His continued involvement could complicate major acquisition plans by either company, given his fraught relationship with President Trump.

    • Wall Street reax: Comcast shares were up nearly 12% at Monday's open, and the company said it plans to meet Q1 guidance when it reports earnings in a few weeks.

    The bottom line: This is a giant step, but still feels like an interim one that maybe wouldn't have happened if not for the Paramount/WBD and Charter/Cox deals.