Discovery, Liberty Global All-in For All3Media

$930M for U.K.-Based Independent Producer
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Discovery Communications and Liberty Global said they have agreed to form a 50-50 joint venture partnership to acquire All3Media, an international producer and distributor of award-winning TV programming, from its founders and the Permira funds for about $930 million.

All3Media, with headquarters in London, is the largest independent production group in the U.K. and has a strong presence in the U.S., Germany, the Netherlands and New Zealand. Its top shows include Ramsay's Kitchen Nightmares, Undercover Boss, Skins, The White Queen, U.K. scripted reality show The Only Way Is Essex and Cash Cab New York. The company has about 8,000 hours of library content across all genres, including drama, comedy, factual and factual entertainment programming. For the fiscal year ended in August 2013, All3Media generated about $855 million in revenue.

 “This venture allows us to work closely with Liberty Global, a valued partner and the largest international cable company, in managing a financially strong, innovative and creatively prolific production company,” said Discovery CEO David Zaslav in a statement. “We are very excited to support All3Media’s talented management team as they continue their steady growth around the world.”

The All3Media group will continue to operate under its own name with its own executive management team, and its existing creative operating model as a standalone, independently managed entity.

“We’re excited to be partnering with Discovery on this transaction. In view of the increased competition for great content and non-linear rights, All3Media represents a smart strategic investment for us over the long-term,” Liberty Global CEO Mike Fries said in a statement. “Just as importantly, we expect All3Media to provide very attractive financial returns given its growth potential and our proposed financing structure. This is just the first step in our mission to own and develop content assets that support our core distribution platform across Europe.”

The purchase price represents a cash flow multiple of about 8.5 times. The acquisition will be funded through a combination of equity and debt raised at All3Media, resulting in both companies contributing approximately $150 million in cash. Under the equal joint venture structure, Discovery Communications and Liberty Global will not consolidate All3Media in their financial statements. The transaction is expected to close in the third quarter, pending regulatory approvals.

J.P. Morgan acted as financial adviser to Discovery Communications and Liberty Global and Freshfields Bruckhaus Deringer LLP served as legal adviser. In addition, DLA Piper LLP served as legal adviser to Discovery Communications. Centerview Partners acted as financial adviser to All3Media and Clifford Chance served as legal adviser. Shearman & Sterling served as legal adviser to the management team of All3Media.