Deal Would Ease Hallmark Sale

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Tying up loose ends for the network’s possible sale, Hallmark Channel’s parent last week reached a nearly $50 million settlement of a dispute with one of the service’s part owners, the National Interfaith Cable Coalition.

Apart from disclosure of the settlement, several potential buyers are currently engaged in due diligence on Hallmark Channel, according to Wall Street analysts. Hallmark’s group of would-be suitors reportedly includes media giants such as News Corp., Viacom Inc., Time Warner Inc. and The Walt Disney Co.

Hallmark’s parent, Crown Media Holdings Inc., outlined details of its settlement with the NICC, a coalition of Christian and Jewish groups, in a securities filing.

The NICC, alleging damages in excess of $100 million, in a letter this May charged Hallmark with failing to honor its 2001 commitment regarding the production and financing of NICC programming.

Under the agreement hammered out, Crown will finance and broadcast a raft of NICC-produced series, specials and telemovies that will air on Hallmark through 2007.

That slate includes a Sunday-morning program, Naomi’s New Morning with Naomi Judd, which debuted Nov. 27 on the network.

The settlement contains several clauses relating to what happens if Hallmark changes hands. The NICC is promised, among other things, a fee ranging from $15 million to $25 million if the network is sold.

Analysts held different views on the settlement’s impact on any Hallmark sale.

“It actually should facilitate the sale because obviously, it was an overhang, and they had the potential to lose $100 million, because that’s what the NICC was actually looking at,” Jefferies & Co. analyst Robert Routh said.

But Alan Gould, an analyst at Natexis Bleichroeder, didn’t see the settlement in such a positive light. He said that the $15 million to $25 million that NICC would get under the agreement if Hallmark is sold “will come out of their [Crown’s] hide,” meaning a buyer will lop that off the purchase price.

In a note last week, Routh wrote that there are a minimum of six bidders for Hallmark, with “at least two that are more than serious and doing their final due diligence before making a formal offer. We also wouldn’t rule out the possibility of other bidders emerging.”

News Corp. president Peter Chernin earlier this month confirmed that his company was bidding for Hallmark. Disney officials have previously vigorously denied any interest in Hallmark, but couldn’t be reached for comment last week.

Hallmark would be a good fit with Disney, according to Routh.

“They can take the content library, they can leverage it across their other platforms,” he said. “It’s family-oriented fare. It’s totally non-controversial. … It’s worth more in their hands than in any other potential buyer’s hands.”

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