October 2013 52 Everything Is For Sale have slowed down due to a dwindling number of companies on the market that are desirable, these same mid-size and large companies are forced to show some growth by cost savings. As the saying goes: everything is for sale, but what’s left to buy? Indeed, Chase Carey, president of 21st Century Fox, recently stated that his company’s “priorities [are] building businesses, over buying them.” According to the New York City-based media investment bank JEGI, “The media, information, marketing, healthcareand technology sectors saw a healthy 708 transactions in the first half of 2013, roughly even in both volume and value with the first half of 2012,” including the highly publicized sale of theBoston Globe and theWashington Post. If 708 seems like a lot of mergers that you somehow missed, don’t worry — most of them were, as the statement suggests, in areas that are not of interest to MIPCOM delegates. But there have been a few eye-catching mega mergers lately that will have implications for those of us gathered in Cannes. Highlighting the shortage of media companies to be acquired is the drama that unfolded last July. After Sprint Nextel acquired Clearwire, the combined group was in turn acquired by Japan’s SoftBank in a bid that involved Dish Network, which lost by offering more value at $25.2 billion but less cash. In the U.S. last March, Liberty Media spent $2.62 billion to acquire 27.3 percent of St. Louisbased Charter Communications, but lost out trying to get Time Warner Cable involved while still courting the acquisition of New York-based Cablevision. Earlier this year, Charter paid $1.625 billion for a Cablevision subsidiary, Bresnan Broadband, which provides video cable service to more than 300,000 customers in Colorado, Montana, Wyoming and Utah. Recently, in line with its goal to become a TV platform, the online portal AOL purchased Adap. tv, a video advertising company, for $405 million — a price that Wall Street considered too high. In terms of programming, the mega merger list is headed by the takeover in Canada of Astral by Bell Media owner BCE for C$3.4 billion. Approval of the deal, announced June 27, is conditional on the sale of seven French-language channels including Disney Junior, Historia, MusiquePlus, MusiMax, Series+, TeletoonandTeletoonRetroas well as five English-language channels including Cartoon Network, Disney XD, Teletoon, Teletoon Retro and The Family Channel. Obviously this is an acquisition that will spinoff other acquisitions. Indeed, it is rumored that Corus Entertainment has already offered BCE just over C$400 million for several of the niche channels including Teletoon, Cartoon Network, and Historia, as well as two of the 11 radio stations that BCE was required to sell off. Approval of the deal also requires BCE subsidiary Bell Media to put C$246.9 million into the creation of original Canadian content. This is C$72 millionmore than the company had initially proposed. Of this money C$175.4 million will be spent on television content and C$71.5 on radio content. This is the second attempt BCE has made to acquireAstral anditsassets.The firstproposalwas rejected last autumn. The new merger plan had already been approved by Canada’s Competition EQT Partners, by a state court in Düsseldorf. Liberty already owns Germany’s second-largest cable operator, Unitymedia. Earlier, at the end of July, the advertising world was in awe of the announcement of the U.S.$35.1 billion merger of New York City-based Omnicom and Paris-based Publicis Groupe, creating the world’s largest advertising firm, which will have a global work force of around 130,000 and will include such iconic advertising brands as Saatchi & Saatchi, Leo Burnett, TBWA, BBDO and Razorfish, among many others. More directly related to the content business was the June announcement by Scandinavian production and distribution group Modern Times (MTG), that it had beaten off competition from Sky Vision to acquire a 92.4 percent stake in DRG, the British distributor which includes The Inbetweeners and Don’t Tell The Bride in its catalog for a reported sum of £15 million (U.S.$23 million). The deal saw DRG founder and former CEO Jeremy Fox returning to the company, while managing director Jonathan Jackson exited. At the same time as the acquisition of DRG, Modern Times also announced its purchase, for an undisclosed sum, of a 51 percent stake in Norwegian production company Novemberfilm. Despite this announcement, the purchase of DRG is seen by many as representing a significant first step towards the realization of MTG’s EVP of Content and CEO Patrick Svensk’s long-held ambition to forge a strategic move into both the U.K. and the U.S. Looking to the future, speculation was rife that ITV, the U.K.’s largest commercial broadcaster, was mulling a U.S.$135 million bid for Finnish producer Nice Entertainment. Although ITV refusedtocomment,sayingit,“nevercommentson speculation,” the Helsinki-based company would indeed be a very nice (pun intended) acquisition, producingover 100dramas and reality shows such as Hidden Tracks, The Half Brother and Celebrity Babysitter. It is also true that with profits at Nice jumping 35 percent to U.S.$12.8 million this year, Finnish investment company Capman, which owns Nice, is said to be keen to sell. And ITV has been in a buying mood recently as chief executive Adam Crozier seeks to diversify its revenue streams away from its traditional dependence on advertising, while at the same time increasing its international base, thereby enabling it to better sell its shows internationally. Crozier’s recent acquisitions include Gurney Productions, maker of Duck Dynasty; Thinkfactory Media, producer of Hatfields and McCoys; and Cake Boss maker High Noon Entertainment — spending £53 million (U.S.$81.5 million) in the first six months of this year alone. From the appetite for acquisition shown by some companies looking to grow or diversify, it is unlikely that the M&A business will run out of steam any time soon. However, as Peggy Koenig, managing partner and co-CEO at investment house Abry recently commented, “the overheated credit markets are the most important factor impacting M&A, although it is easier to finance acquisitions, and at levels that can drive good equity returns, this has also translated into higher asset prices.” BJ (Written with reports from London, Toronto and New York City) Bureau, which, said John Lawford, executive director and general counsel for the Vancouverbased Public Interest Advocacy Centre, “made it much harder for the [regulator] CRTC to reject the deal.” Earlier in the year, the world’s largest cable company, measured by subscribers, was formed when John Malone’s Liberty Global closed the £18 billion (U.S.$28 billion) acquisition of U.K.’s Virgin Media, which, in addition to being a valuable addition to Liberty’s existing stable of 11 cable companies, also places Malone head-tohead with Rupert Murdoch’s BSkyB in the U.K.’s pay-TV market. Malone’s entry into the U.K. pay market represents the culmination of a long-held ambition. Virgin Media was formed in 2006 from the alliance of Virgin Mobile, U.S. Telco, NTL and U.K. Telco, Telewest. In 2002 Malone had tried to use his 24 percent stake in Telewest to force its merger with NTL, a move that was strongly resisted by the stockholders of the heavily indebted company. Since gaining control of the U.K. cable business in 2006 Richard Branson has made the company profitable — but only after investing £13 billion (U.S.$20 billion) in laying fiber optic cables in half of U.K. homes. And debt is still very much a part of this deal. Liberty Global plans to fund its cash element of the cash and shares offer by adding nearly £2 billion (U.S.$3 billion) to the company’s debt pile, taking it to U.S.$39 billion —more than twice its annual revenues of U.S.$17 billion. However, this prospect seems a little less eye-watering in view of the estimated 15 years of tax-free income Virgin Media and its new owners will enjoy as a result of write-offs on the investment already made in fiber optics. In Germany, Vodafone has bid 7.7 billion euro (U.S.$10.3 billion) for Kabel Deutschland, a cable operator that Liberty Global wanted to buy. Meanwhile, last August, Liberty was blocked from purchasing for 3.2 billion euro (U.S.$4.3 billion) Kabel Baden-Württemberg, Germany’s third-largest cable operator owned by Swedish MTG’s EVP of Content and CEO Patrick Svensk (Continued from Cover)
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