Saturday, December 15, 2012

Discovery to Acquire ProSieben Scandinavian Assets - The ...

Cable networks powerhouse Discovery Communications has won the auction for the Scandinavian assets of German TV giant ProSiebenSat.1 in a deal that values the business at $1.7 billion (?1.33 billion).

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Discovery 's largest-ever deal, announced Friday, will further expand Discovery's sizable international business, which has been a key growth driver for the company. Discovery CEO David Zaslav has said he spends about 40 percent of his time on the international business. "We're the best international media company," making more money abroad than others, he told an investor conference this month.

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Zaslav this year also said that his company's "No. 1 target" for acquisitions is the international space. "We've grown our international business from 2007, [when] we were making $250 million," he said. "This year, we'll make significantly more than $700 million."

Discovery said the deal "further solidifies Discovery?s long-term growth in the strong Nordic TV markets" and expands its brand portfolio "by adding general entertainment, scripted and sports programming to the company?s suite of services for the first time." The transaction is subject to regulatory review and is expected to close in early 2013.?

?SBS Nordic has a fully distributed portfolio of dual revenue stream networks with a terrific management team that will expand Discovery?s footprint across the Nordic region, which includes some of the most well-penetrated and stable TV markets in the world,? Zaslav said.

The ProSieben Nordic assets, formerly known as SBS Broadcasting, include TV networks and radio stations in Denmark, Sweden, Norway and Finland. They will add broadcast businesses to the company's traditional focus on pay TV networks.

"With Discovery Communications we've found a true global player for our Northern European assets," said ProSiebenSat.1 CEO Thomas Ebeling, announcing the deal on Friday. "I wish them success."

The Scandinavian deal, in which the company beat out private-equity firm Providence Equity Partners, comes as Discovery also is finalizing another deal in Europe with French broadcaster TF1.

On Thursday, TF1 said its talks with Discovery about a strategic alliance could wrap up within weeks, with the U.S. company looking to pay about $240 million to acquire a 20 percent stake in TF1's Eurosport channel and other networks. Discovery looks set to get an option to take its stake in Eurosport to 51 percent in two years and its stake in the other networks to 49 percent. The companies announced in November that they had entered exclusive talks.

The TF1 deal would give Discovery bigger exposure in France, allow it to sell more of its content there and let it leverage Eurosport's reach into 59 countries.

Discovery recently also agreed to acquire Dubai-based Takhayal Entertainment, a lifestyle TV company. Discovery on Friday also announced that its board has approved a $1 billion increase to its existing stock-buyback program.

?Individually, and taken together, the acquisition of SBS Nordic, our pending strategic partnership with TF1 through the acquisition of a minority stake in Eurosport and the increase in our share-repurchase program are all complementary to our long-term growth strategy of delivering sustained operating results, creating strong organic growth through investment in content, brands and talent, and returning capital to shareholders, Zaslav said.

The ProSieben deal adds to the company's reach in Scandinavia. About a year ago, ProSieben decided to sell assets in the Benelux countries but retain its Nordic business because bids for the latter were deemed too low. But after some unsolicited approaches, the company said this year that it would evaluate bids.

ProSieben's Scandinavian assets generated $606 million in revenue in 2011. "What ProSieben does offer is the ability to open some new doors in underdeveloped markets," said MKM Partners analyst Eric Handler.

SBS Nordic has the No. 2 TV portfolio in Norway with four networks and an overall viewership share of 34 percent, the No. 3 portfolio in Sweden with two networks and an overall viewership share of 22 percent and the No. 3 TV portfolio in Denmark with four networks and an overall viewership share of 19 percent, the companies said. The SBS operations also include two networks in Finland and 19 radio stations, as well as several digital brands.

"Discovery has stated for a while that it would like to continue building out its international footprint," he had said ahead of Friday's deal announcement. "The company?s interest in the ProSieben assets, as well as the recently announced deal in the Middle East and the likely deal with TF1 in France definitely reflect a desire to expand."

The analyst argued that given that Discovery has a strong balance sheet and has considerable borrowing capacity, "looking for expansion opportunities makes a lot of sense." Added Handler: "One of the key benefits of international expansion is that a high percentage of Discovery?s content translates well on a global basis. Being able to program globally provides a lot of operating leverage for the company and creates a lot of efficiencies."

Davenport & Co. analyst?Michael Morris said: "Discovery has been clear that they will invest in expansion where they see as appropriate and increasing their global footprint at a reasonable multiple fits their core competency."

About the planned $240 million TF1 deal, he said: "Ownership of unconsolidated minority stakes and acquisition of broadcast assets (rather than or in addition to pay TV) both further complicate the Discovery story, which we view as an incremental negative, all else equal. In other words, this could prove to be a good acquisition, but we don't like more complication where avoidable."
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He added, "Management has a strong operational track record, and we believe incremental European investments are well thought out -- however, this may prove to be the quintessential show-me investment given the additional complication."
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Email: Georg.Szalai@thr.com
Twitter: @georgszalai

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Source: http://www.hollywoodreporter.com/news/discovery-acquire-prosieben-scandinavian-assets-402443

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