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Analysts: Comcast-Disney Deal for E! Could Turn Off Investors

Mar 14, 2006  •  Post A Comment

Comcast Corp. investors may take a negative view of the company’s plan to buy complete ownership of E! Entertainment from The Walt Disney Co., preferring that executives focus on cable services rather than on building the channels business, an analyst said.

Disney currently has a 39.5 percent stake in E! Some analysts speculate that completion of the deal is unlikely to move Comcast’s stock, though it could clean up Comcast’s balance sheet.

“Investors will probably not view this positively, as they would prefer Comcast to focus on its core cable business rather than buy content assets, and it could delay the planned share repurchases,” Mr. Moffett said in a research note.

Comcast’s decision to go after E!, which includes the namesake cable channel plus Style network, could be less about taking full ownership of the networks and more about using the deal as a negotiation tool tied to Comcast and Disney’s discussions about a new carriage agreement for ESPN, said Bernstein Research analyst Craig Moffett.

One possible outcome of the deal is that it could solve the mystery of just how much E! is worth, Mr. Moffett said.

If the companies complete a deal, it could go a long way toward helping Wall Street put a value on E!’s assets. Many analysts are estimating that Disney’s stake in E! could be worth between $1 billion and $1.1 billion, which could put the entire property’s value at around $2.5 billion.

A Comcast spokesman refused to comment, as did a Disney spokesman.

For years there has been speculation about whether either company would look to buy out its partner and take full control of E! While the relationship is seen as beneficial for both sides, Wall Street analysts have long preferred single owners controlling cable channels to simplify ownership structures and balance sheets.

That was one of the reasons behind Viacom’s decision in 2003 to buy out the other half of its stake in Comedy Central, which it owned 50-50 with Time Warner. Media players predict similar motivations could come into play down the road for channels such as Court TV, which is owned 50-50 by Time Warner and Liberty Media.