In case you haven’t been following it, shares of GE have been taking it bad lately. On one side, you have the industrial division, highly exposed to a slowing economy and any difficulty among customers in financing big purchases. The other side is finance, and everyone fears it’s sitting on a hand grenade. In a bid to stem the decline and reassure the markets, the company took a $3 billion investment from Warren Buffett, in part to raise cash, and in part to say “Look, The Oracle trusts us!” It also announced a $12 billion common stock offering — diluting current shareholders, but giving it an injection of much-desired cash.
So where does this leave its 80 percent-owned NBCU unit, which fits awkwardly between the industrial and finance sides. Besides the fact that GE executives are pretty consistent about not wanting to sell it, the fresh capital raise diminishes the need to move the unit. Beyond that, you have to wonder who would be the buyer here. A year ago, it was estimated that the business could be worth around $40 billion, but it’s probably declined a bit since then, given the diminished valuations among its peers. Still, who has that kind of money to spend? And anyone who might be interested would be severely constrained by the market, whether they wanted to pay in stock or debt financing (probably flat-out impossible at the moment). If you’re GE, it doesn’t make much sense to sell now in the basement, when you can hold it and keep collecting a steady flow of cash.
In the end, it’s basically an accounting question. There’s no reason to think that NBCU is somehow hurting the performance of GE’s jet engines, aircraft leasing or water desalination businesses. If they could get more in a sale than they could by collecting future cash flows, it would make sense to pull the trigger. But in this environment, with less need for capital, there’s not much reason for the company to rush a deal.