Posted on November 5, 2009 at 9:22 AM
Filed under: Best Practices | Corporate Strategy | Joint Ventures and Alliances | Middle market
Tagged: Cox Communications , Kenneth Lowe , Scripps Networks , Travel Channel

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Scripps Networks Interactive Inc. (NYSE:SNI) is taking a 65% stake in Travel Channel Media, valuing the cable network at about $975 million -- the high end of analyst valuations. Cox Communications Inc. (NYSE:COX) will retain a 35% stake, spinning it off into a so-called leveraged joint venture.

Scripps will contribute $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.

The deal structure allows Cox to skip out on a substantial tax bill related to when it acquired Travel Channel in 2007 and received $1.3 billion in cash for its 25% stake in Discovery Communications Inc. (NASDAQ:DISCA). The Wall Street Journal notes the Scripps deal structure is similar to one being discussed by Comcast Corp. (NASADAQ:CMCSA) and General Electric Co. (NYSE:GE) for NBC Universal Inc. Besides the iffy cash component of that possible deal, a Chicago Tribune reporter argues a deal could pose regulatory questions.

Questions in the Scripps deal will be about the future of the Travel Channel, which experts have said has weak brand positioning on the Internet with about 1.3 million unique visitors per month. Perhaps targeting mobile media will help garner some advertising, a source of revenue that has been crippled across all media as a result of the economic downturn.

"The incredibly complementary nature of our lifestyle media businesses presents an abundance of opportunity to provide services for Travel Channel that will result in increased advertising and affiliate revenues and substantial cost synergies," said Kenneth Lowe, chairman, president and CEO of Scripps. Some popular Travel Channel shows include "Man v. Food," "Anthony Bourdain: No Reservations," "Ghost Adventures" and "Samantha Brown's Great Weekends." - Baz Hiralal


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