The deal didn’t quite tip the $1 billion mark, but it values the cable network at $975 million. Cox Communications isn’t getting out completely, selling only a 65% stake to Scripps Networks Interactive (SNI).
Why is Cox keeping 35%? You guessed it: Taxes. Cox deferred the taxes from its gain back in 2007 from swapping its interest in Discovery Communications to John Malone’s Liberty Media for an interest in the Travel Channel. Holding onto an equity stake in the new joint venture with SNI will allow Cox to continue to defer sending a check to Uncle Sam.
If you divide the total enterprise value of $975 million by 65% the value of the portion being acquired by SNI is $633.75 million. SNI, however, will pay only $181 million in cash to the new partnership. The partnership, in turn, will take on $878 million in third-party debt that will be guaranteed by Scripps and indemnified by Cox, with the proceeds to be distributed to Cox. The transaction will result in the partnership having about $696 million in net debt. How’s that for complicated? Closing is expected no later than January 2010.
Travel Channel today reaches about 95 million US television households. The television network – the cornerstone of Travel Channel Media – supports a growing range of cross-platform initiatives including Internet, mobile and social media applications.
“Combining the Travel Channel with Food Network and HGTV will make our fast-growing, young company the undisputed global leader in lifestyle programming. This collection of popular lifestyle networks will be in great demand worldwide and promises to create substantial long-term value for all of our stakeholders,” said SNI CEO Ken Lowe, who delayed his company’s Q3 earnings report and conference call by one day to Friday after making the big acquisition announcement.
“Adding the Travel Channel, and its related enterprises, provides us with a unique opportunity to meaningfully expand our portfolio into a lifestyle category that’s highly desirable to media consumers, advertisers and programming distributors. Our vision for Travel follows the same script that’s made Food Network and HGTV two of the most powerful brands in all of television. By lending our unparalleled expertise in developing successful lifestyle media businesses, we have every confidence that we can build on Travel’s strong brand identity and leverage the successes achieved to date by the top-notch team at Travel Channel and our new partners at Cox Communications,” Lowe said.
“This solid partnership we’re establishing today allows us to maintain an interest in Travel Channel while at the same time giving the network an opportunity to leverage the resources and expertise of a successful programmer like Scripps Networks Interactive,” said Cox Communications’ President Patrick Esser.
Cox Communications is the nation’s third largest cable MSO. It is owned by Cox Enterprises.
RBR-TVBR observation: Broadcast station valuations may have plunged, but the market is still strong, despite the recession, for strong cable brands. The Weather Channel sold last year, as the recession began to get really ugly, for $3.5 billion. The much-smaller Travel Channel has now commanded a $975 million price tag, boosted in no small part by Rupert Murdoch getting into the bidding. Back when Goldman Sachs began quietly shopping the property expectations were in the $600-700 million range.
Interestingly, both The Weather Channel and Travel Channel were owned at one point by Landmark Communications, although the Travel Channel has had several owners over the years and was actually launched by Trans World Airlines in 1987.