Analysts are applauding the big ticket acquisition of regional sports channel YES, which carries New York Yankees baseball and other sports. It gives Rupert Murdoch’s company three decades worth of Yankees baseball without putting a dent in the company’s debt profile.
The deal with give the company 49% of the network, and values it at $3B. It also allows News Corp. to increase its stake to 80% after three years have elapsed. Meanwhile, the rights of YES to carry Yankees baseball were extended until 2042, with incrementally-increasing annual fees expected to reach $350M by the end of the term.
Moody’s said the move did not harm New Corporation’s senior unsecurity rating and while providing long term strategic and financial opportunities. “We believe the YES Network will be the crown jewel amongst all its RSN franchises and give the company a strong presence in the New York market, which is among the most important market for numerous pay-TV operators,” stated Neil Begley, a Moody’s analyst. In Moody’s view, a continuing long-term ownership stake in the network will increase the company’s leverage in negotiating pay-TV distribution contracts for all its other RSNs if they are negotiated as a group. “We believe this transaction could also be a consideration in News Corp.’s strategy around renewing the rights for the Los Angeles Dodgers,another Major League Baseball team which was recently acquired for around $2 billion,” added Begley.
Marci Ryvicker of Wells Fargo also approved. She said, “Bottom line, we think the YES Network fits within NWSA’s core cable business, and is a good addition to its substantial regional sports network (RSN) portfolio. Specifically, YES provides valuable sports programming for one of the most prominent franchises (the Yankees) in the country’s top media market. YES Network’s footprint is in New York, Connecticut, New Jersey, and parts of Pennsylvania, as well as national availability on several cable and satellite television distributors.”
MarketWatch reported the work of Sanford C. Bernstein analyst Todd Juenger. He said that the current News Corp. deal works out to 15 time EBITDA, and the exercise of the option to go to 80% would work out to 19 times EBITDA. And if you apply the same metrics to Walt Disney’s ESPN, it would give the cable sports juggernaut a value of $66B.