1 / 8

GSN/FUN Update February 19, 2010

GSN/FUN Update February 19, 2010. Executive Summary. A sale of SPE’s 35% stake in GSN to DirecTV or a third party could generate a significant gain but should be structured to protect strategic benefits Position as generating funds for redeployment in wholly-owned channels (new or existing)

phatfield
Download Presentation

GSN/FUN Update February 19, 2010

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. GSN/FUN Update February 19, 2010

  2. Executive Summary • A sale of SPE’s 35% stake in GSN to DirecTV or a third party could generate a significant gain but should be structured to protect strategic benefits • Position as generating funds for redeployment in wholly-owned channels (new or existing) • Determine if other operating relationships (e.g., licensing of shows) should be protected contractually post sale • However, there is currently no forcing function for a sale to DirecTV • Unclear if DirecTV’s new management intends to acquire network assets • Buy/sell not in place until December 2011; “put” not in place unless DirecTV is sold to a third party • DTV has a right of first refusal on a sale • We need to identify a process for gauging DirecTV’s interest without losing leverage in a sale • Discuss new management’s desire to control / consolidate GSN • Consider whether operating relationships create a point of leverage (lLicensing deals expire in February 2011; GSN seeking to license WOF and Jeopardy! for Facebook) • Endemol has expressed interest and should be factored into the approach • If we identify a set of conditions under which we would sell to Endemol (e.g., retain an operating deal or swap for production co. assets); Endemol discussions would create a forcing function with DirecTV

  3. Summary of Prior Transaction Valuation in February 2009 Transaction Gain if sold for $780MM 3/31/2011 GSN FUN Combined Assumed Transaction Price $780MM Assumed Transaction Price $600MM $180MM $780MM SPE Stake % Sold / Bought 35% 15% 35% N/A Value of SPE Share $273MM Cash to (from) SPE $90MM ($63MM) $27MM Basis (1) $78.6MM Resulting SPE Stake 35% 35% 35% Gain $194.4MM Basis 3/31/2009 1/31/2010 3/31/2011 Remaining GSN Basis $13.8MM -- -- FUN Purchase $63MM -- -- Total GSN/FUN Carrying Value $76.8MM $69.9MM $78.6MM (1) • Includes dividends of $0.5M from Feb-Mar 2010 and $17.5M in FY11 and equity income of $3.1M from Feb-Mar 2010 and $23.6M in FY11.

  4. Combined GSN/FUN Earnings Are Roughly In-Line With Expectations • Since the last transaction, underperformance by FUN has been offset by over performance by GSN • Provided by GSN Management September 2008; earnings are pro forma as if DirecTV was paying $0.075/sub in all years, CY08 excludes $5.6MM Comcast Reserve Reversal and CY09 excludes a one-time DTV catch-up payment of $13.8MM. • CY2009 per Management budget; CY2010-CY2012 per SPE haircut to forecast

  5. Valuation Considerations at Time of Last Transaction (April 2009) • Each business was valued independently • DCF values and comparable transaction multiples were generally in-line with actual transaction values • However, transaction values were at significant premiums to public markets, which were depressed at the time FUN Valued at $180MM GSN Valued at $600MM DCF DCF DCF at 11% after-tax discount rate DCF at 15% after-tax discount rate $645MM $198MM (7%) (9%) Deal was below DCF by: Deal was below DCF by: Public Comparables Forward Trailing Public Comparables EBITDA(1) Multiple for Comps(2): 7.3X 6.8X Forward EBITDA Multiple for Comps: 8.4X EBITDA(1) Multiple for GSN @ $600MM: 16.4X 12.2X Forward EBITDA(4) Multiple for FUN @ $180MM: 13.6X Deal was above Comps by: 125% 79% Deal was above Comps by: 62% M&A Transactions M&A Transactions Trailing EBIT Multiple on Comps(3): 15.0X Trailing Revenue Multiple on Comps(5): 3.1X Trailing EBITMultiple for GSN @ $600MM: 12.2X Trailing Revenue Multiple for FUN @ $180MM: 3.2X Deal was below Comps by: (19%) Deal was above Comps by: 4% • EBITDA multiples are after programming amortization. • Comparables included Scripps and Discovery. • Median of selected media M&A transactions from 2006 through January 2009 adjusted downward to account for declines in public markets through April 2009. • Based on FUN 2009 EBITDA forecast at time of deal, which was $13.2MM. • Revenue multiples on comparable transactions were decreased by 35% to account for declines in public markets through April 2009.

  6. Valuation Considerations Today • Going forward, GSN/FUN is likely to be valued as a single business and compared to comparable cable networks • A combined $780MM valuation remains in-line with values implied by recent M&A transactions and is now more in-line with public comparables • 45% - 49% premium to public multiples is a healthy but feasible control premium Comparable Transactions Public Comps EV/EBITDA EV/EBITDA Forward Trailing Trailing Multiple for Comps(1) 8.1X 10.4X Travel Channel / Scripps 13.9X GSN/FUN Multiple @ $780MM Value (2) 11.7X 15.5X GSN/FUN Multiple @ $780MM Value 15.5X Implied Premium 45% 49% Implied Premium 12% • For Scripps and Discovery, multiples represent 12 months ending CY2009 and CY2010. EBITDA is after programming amortization. • Multiple based on CY2009 EBITDA of $50.4MM and CY2010 EBITDA of $66.4MM.

  7. In November 2009, Liberty Split-Off a Subset of Assets Including GSN Liberty Media Corp Tracking Stocks Liberty Entertainment Inc. Liberty Capital Liberty Entertainment Liberty Interactive “LCAPA” , “LCAPB” “LINTA” , “LINTB” “LMDIA” , “LMDIB” “LEI” • Atlanta National Baseball Club (100%) • Current Group (8%) • Embarq Corporation (3%) • Hallmark Entertainment Invest. (11%) • Jingle Networks (9%) • Kroenke Arena Company (6.5%) • Leisure Arts (100%) • LodgeNet Entertainment (9%) • MacNeil / Lehrer Productions (67%) • Motorola (3%) • Overture Films (100%) • Priceline.com (1%) • Sprint Nextel Corporation (3%) • Starz Media (100%) • Time Warner (3%) • TruePosition (100%) • Viacom (1%) • WFRV / WJMN Television (100%) • Backcountry.com (81%) • Bodybuilding.com (83%) • Borba (25%) • BUYSEASONS (100%) • Expedia (24%) • GSI Commerce (19.7%) • HSN (30%) • IAC / InteractiveCorp (30%) • Interval Leisure Group (30%) • Provide Commerce (100%) • QVC (100%) • Ticketmaster (30%) • Tree.com (Lending Tree) (30%) • DirecTV (52%) • FUN Technologies (100%) • GSN (50%) • Liberty Sports Holdings (100%) • Starz Entertainment (100%) • Wildblue Communications (37%) • PicksPal, Inc (73%) • DirecTV Group (54%) • GSN/FUN Technologies (65%) • Liberty Sports Holdings (100%) Assets Transferred to Liberty Entertainment Inc. (Split-off Entity)

  8. DirecTV Group Stockholders (excluding LEI) “LEI” Stockholders • DirecTV Group (54%) • FUN Technologies (100%) • GSN (50%) • Liberty Sports Holdings (100%) • DirecTV Group (46%) LEI Was Subsequently Merged into DirecTV, Which Now Owns 65% of GSN / FUN OLD NEW • DirecTV Group (100%) • GSN/FUN Technologies (65%) • Liberty Sports Holdings (100%) DIRECTV “Holding” (Ticker: DTV) 7

More Related