Discovery Communications Inc. (DISCA) agreed to buy 12 television networks from German broadcaster ProSiebenSat.1 Media AG (PSM) for $1.7 billion, its largest acquisition, as the owner of the Animal Planet cable network looks to expand its international unit.
Discovery, based in Silver Spring, Maryland, beat out other bidders for the ProSiebenSat.1’s SBS Nordic unit, which comprises television networks in Norway, Sweden, Denmark and Finland. Discovery also announced it’s buying a 20 percent stake in Societe Television Francaise 1 (TFI)’s Eurosport channel for $221.6 million in a partnership that would allow it to potentially take full ownership after two years.
Discovery, which owns TLC and has a joint partnership with Oprah Winfrey’s OWN cable network, is adding channels and programming in new markets to counter slowing growth in the U.S. The company gets about half its revenue from ads, with the rest coming from rights fees from pay-TV operators. Its international business, which accounts for a little more than a third of annual sales, is growing faster than its U.S. business, said Chief Executive Officer David Zaslav.
“We were already the largest pay-TV programmer in the world outside the U.S., and this transaction makes us even bigger,” Zaslav said in an interview today after the deal was announced.
In 2010, Discovery bought the 50 percent it didn’t own in Animal Planet from BBC Worldwide for about $150 million, according to data compiled by Bloomberg. Three years earlier, it spent $250 million to acquire the website HowStuffWorks.com, according to a person with knowledge of the negotiations at the time.
Discovery has been looking overseas and into new technologies for growth. Earlier this year, it acquired online- video startup Revision3 for an undisclosed amount as part of a strategy to own and distribute reality programming. The company also bought a 20 percent stake in Televista, a French pay-TV company specializing in the female lifestyle market.
ProSiebenSat.1, controlled by KKR & Co. (KKR) and Permira Advisers LLP, already sold its Dutch and Belgian broadcasting units in April 2011 to slash debt.
“It’s obviously a good deal” for ProSiebenSat.1, said Omar Sheikh, an analyst at Credit Suisse in London. “People were looking for $1.2 billion. The fact that they’re paying out so much helps too.”
ProSiebenSat.1 plans to propose to pay a total 1.2 billion euros ($1.6 billion) in dividends, or 5.60 euros a share, at its July 2013 shareholder meeting, it said in a statement. That compares with a payout of about 245 million euros for the current year, it said. The decision was coordinated with Lavena, the holding company set up by KKR and Permira.
Germany’s largest private broadcaster, which is based near Munich, also plans to propose a conversion of non-voting shares to common stock, which will require a 75 percent majority at the shareholder meeting. Such a move would facilitate an eventual exit for KKR and Permira. The company also said it plans to use 500 million euros from the sale to repay debt.
ProSiebenSat.1 had said in August that it was evaluating interest in its Nordic assets after adviser JPMorgan Chase & Co. (JPM) was approached by bidders. The Nordic region generated about 476 million euros in revenue in 2011, or 17 percent of ProSiebenSat.1’s sales, according to data compiled by Bloomberg.
The transaction is subject to regulatory review and is expected to close in early 2013, the companies said.
Discovery also announced it would add $1 billion to the remaining $500 million on its share repurchase program.
Last month, Discovery’s third-quarter earnings missed analysts’ estimates and the company also narrowed its annual operating income forecast, excluding certain items, to as much as $2.15 billion, compared with up to $2.2 billion before.