According to industry sources, Comcast Corp. (CMCSA), the largest cable TV operator in the U.S., is on the verge of acquiring online video ad-serving company, FreeWheel. The deal size is likely to be around $320 million.
In the last couple of years, Comcast has become a behemoth in the entertainment production and distribution industry. The company has the best in class video distribution network and it has become a major content developer after its acquisition of NBC Universal.
However, the idea of acquiring FreeWheel is targeted at controlling the video processing functions, which deal with technology standards to smoothly integrate video content and video delivery activities. The acquisition will also boost the performance of the two reporting segments of Comcast, namely, Content business and Cable business.
The takeover will enable Comcast to place advertisements on its own content through several platforms, including TVs and handheld devices. Similarly, through FreeWheel, other content developers can offer more TV shows to Comcast’s cable platforms in order to generate more advertising revenues.
FreeWheel has a very strong clientele including NBC Universal, Fox broadcasting Co., Turner Broadcasting System Inc., Discovery Communications Inc., DISH Network Corp. (DISH), DIRECTV (DTV) and AT&T Inc. (T), to name a few.
Recently, Comcast announced its decision to acquire Time Warner Cable for approximately $45.2 billion. If the proposed deal clears regulatory hurdles, Comcast will benefit from geographic expansion, gain significant operating cost synergies, which will boost its bottom line and free cash flow, and acquire a unique triple-play (voice, video and data) delivery and high-quality content distribution mechanism. Currently, Comcast carries a Zacks Rank #3 (Hold).
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