Moguls Flying to Sun Valley With $53 Billion Deal RevivalChristopher Palmeri and Brian Womack
Media dealmakers digesting $53 billion of mergers, spinoffs and acquisitions announced so far this year head to Allen & Co.’s Sun Valley conference this week to lay the groundwork for more.
So far, more than 240 media deals have been struck in 2013, according to data compiled by Bloomberg, more than triple the $15 billion at this time last year, even as transactions slow overall. The action puts the industry third after real estate and food, and marks the fastest pace for media since 2008, when $57.2 billion in M&A had been announced by midyear.
Dealmaking is a big part of the New York investment bank’s 30-year-old conference, if not the official program. The $186 billion union of Time Warner Inc. and America Online was hatched there in 1999. Walt Disney Co.’s Bob Iger said last year his strongest memory was of 1995, when Disney’s $19.5 billion purchase of Capital Cities/ABC Inc. was conceived. This year, Hulu LLC is for sale, and John Malone is pushing to unite Charter Communications Inc. with Time Warner Cable Inc.
“Old media is buying new, old is buying old,” said Laura Martin, an analyst for Needham & Co. in Los Angeles. “There’s just of lot cash on these balance sheets, a lot of free cash flow, and they have to put that to work.
As this year’s attendees arrive at the Idaho mountain resort, Hulu owners Disney, 21st Century Fox Inc. and Comcast Corp. are looking for a new owner that will keep buying shows for the upstart Web-video site. The chairmen-CEOs of all three companies, Iger, Murdoch and Brian Roberts, have been invited.
Among Hulu’s bidders are incumbent pay-TV systems DirecTV, Time Warner Cable and U-verse owner AT&T, which is working with former News Corp. President Peter Chernin, people familiar with the situation have said. Each is contending with the growing popularity of mobile and Web-based viewing, and competition from companies including Netflix Inc.
At the same time Malone, the cable-TV billionaire who has been buying systems in Europe, is looking to assemble a larger pay-TV operator in the U.S., which would bolster his negotiating clout with content producers.
As Hollywood wrestles with its digital future, media moguls have to decide what programs to sell to digital outlets without killing the pay-TV cash cow, which assets to sell and how to strengthen businesses such as TV stations or cable systems to adapt in changing times.
‘‘Growing competition from the Internet is requiring more investment,” analyst Martin said. “That kind of pressure drives consolidation, which helps your margins. We expect consolidation in distribution and with content.”
Media companies are armed with strong balance sheets and rising stock prices to use for deals as they grapple with an encroachment into entertainment by cash-rich tech players.
Facebook Inc., Google Inc. and other technology companies have increased their profile in Sun Valley as movies, music and TV become more important to their businesses.
Invitees include Google Chairman Eric Schmidt and Co-Founders Larry Page and Sergey Brin, as well as Salar Kamangar, who runs the YouTube site, which introduced paid channels this year. Facebook’s contingent includes Mark Zuckerberg, Sheryl Sandberg and Dave Ebersman. Apple Inc. CEO Tim Cook is listed to attend again, as his company starts an Internet radio service.
Media CEOs such as Time Warner Inc.’s Jeffrey Bewkes, CBS Corp.’s Leslie Moonves and Viacom Inc.’s Philippe Dauman fly to the resort with their corporate coffers flush. Viacom, owner of MTV, has $1.26 billion on hand, the most since late 2011. Time Warner has $2.49 billion.
Rupert Murdoch attends this year with $2.6 billion sitting on the balance sheet of News Corp., his newspaper company, which was recently split from the 21st Century Fox entertainment and television business.
Sony Corp. CEO Kaz Hirai, under pressure from activist investor Daniel Loeb to spin off the company’s movie and music businesses, is scheduled to attend.
Media stocks are also higher. The 16 companies in the Standard & Poor’s 500 Media Index have appreciated 43 percent in the year since the last gathering, compared with 21 percent for the broader S&P 500 Index. Gannett Co., which is spending $2.03 billion for Belo Corp., is the leader with a gain of 77 percent.
The conference coincides with renewed interest in acquiring broadcast stations, spurred by low financing costs, rising political advertising and the growth in retransmission fees. In addition to Gannett’s proposed deal, Tribune Co. has agreed to acquire Local TV Holdings LLC, owner of 19 broadcast outlets, for $2.73 billion.
M&A activity in the TV industry totaled $3.3 billion from April to June, the highest quarterly total since 2007. With the Local TV-Tribune deal announced on July 1, the activity in the current quarter almost matches that total.
While deals have surged in media, M&A overall is down from a year ago, as higher stock prices and a shaky recovery make some executives wary of overpaying or selling too cheaply. Transactions worldwide totaled $490 billion in the second quarter, up 3 percent from the previous three months yet down 10 percent from a year earlier.
The gathering features sessions on business and global economic issues. Last year Amazon.com Inc. Chairman and Chief Executive Officer Jeff Bezos gave an overview of cloud-computing. Daniel Yergin, the Pulitzer Prize-winning author of “The Prize,” spoke about shale gas. Oprah Winfrey interviewed Warren Buffett about his life.
Between briefings, moguls mingle at the resort and at events such as a Western-themed barbecue by a creek. Last year, Washington Post Co.’s Donald Graham, Facebook Inc.’s Mark Zuckerberg and Netflix Inc.’s Reed Hastings sat down for an afternoon drink.
The backdrop remains deals. Activision Blizzard Inc.’s CEO Robert Kotick strolled with Vivendi SA Chairman Jean-Rene Fourtou at the conference a year ago. Vivendi has been mulling a sale of its 61 percent in Kotick’s video-game company.
“For the past few years, there were relatively few deals announced after the conference,” said Paul Sweeney, media analyst for Bloomberg Industries. “This year there’s an expectation that, given the frenzied deal activity in the media space and John Malone’s re-emergence in the cable space, we may see headlines coming out of Sun Valley.”