It's mid-August and while some dealmakers vacation, old rumors are appearing like reruns on television. The latest?
Silicon Alley Insider (two weeks after
BusinessWeek) revisited speculation that Time Warner Inc. will bid on Scripps Networks Interactive Inc., the parent of Food Network, HGTV and various other cable TV networks. But why is this classic in heavier rotation than an episode of Food Network's "Good Eats"?
Continue reading below
When the rumor started is hard to say, but it likely picked up credence in October, when E.W. Scripps announced plans to spin off its cable TV and Internet assets into an independent company, Scripps Networks, which officially started trading on the New York Stock Exchange last month. Once the unappetizing newspapers and TV networks were cut away, Scripps Networks instantly became a tasty treat for the likes of Time Warner, Comcast Corp., Viacom Inc. and just about anyone else with cable TV networks. With its newfound independence, valuing the business becomes more transparent and far easier for an acquirer to swallow without the grizzle that would be E.W. Scripps' newspaper business.
But why Time Warner over others? Simple, its own spinoff of Time Warner Cable Inc. is about to net $9 billion in capital. The math becomes obvious. Scripps Networks has a market cap of $6.98 billion, so Time Warner could easily pay upwards of a 30% premium for Scripps without breaking the bank. In essence, it would be trading its capital-intensive cable system for five cable TV networks and 10 Web sites that would also complement its AOL LLC unit. And that's what I'd call "Good Eats." - Matthew Wurtzel
