Kern: InterMedia ‘Loaded For Bear’

Despite Losing Outdoor Channel, Opportunities Abound to Grow Outdoor Category

Despite being pushed aside by a larger, last minute bid by Denver sports magnate Stan Kroenke in its quest for the Outdoor Channel, InterMedia Partners said it will continue to grow its ratings and reach in its efforts to boost the overall outdoor lifestyle category.

Outdoor Channel earlier Wednesday said it has agreed to a definitive merger agreement with Kroenke Sports & Entertainment in an all-cash deal worth about $227 million. That agreement trumped an earlier $208 million cash and stock deal with InterMedia Partners.

KSE made its unsolicited offer on Feb. 27 and on March 8 determined that it was superior to the InterMedia deal. Outdoor gave InterMedia, parent of the rival Sportsman Channel, four business days (until March 12) to put forth a superior proposal to the KSE deal.

In an interview Wednesday, InterMedia Partners managing partner Peter Kern said that the firm did tweak its original offer – increasing the amount of cash shareholders would receive for some of their shares to $8.75 per share and slightly increasing the equity that Outdoor shareholders would receive – but ultimately Outdoor’s board of directors determined the KSE all-cash offer was better.

Kern said that InterMedia had struggled with the fact that it believed its original offer – which included the option to exchange a portion of shares for cash ($8 per share) and a portion for shares in the new company – was fundamentally superior to the KSE proposal.

“We did try to enhance it,” Kern said of InterMedia’s offer. “The board still ultimately wanted certainty and we weren’t going to make what was already a better deal that much better. It just wasn’t worth it to us.”

Kern wouldn’t say whether InterMedia would later seek further restitution from the courts – it did receive a $6.5 million break-up fee from Outdoor – but stressed that the company’s first priority is to continue to grow the outdoor space.

“That’s still our goal,” Kern said. “We still want to ultimately build the category bigger. We think it’s a much bigger business than either of us has created.”

“In the end, we’re going to go back to competing,” Kern added. “We’ve made our point on the field every day. The good news is that we get to go back and do that today and they have to do another deal.”

Sportsman Channel has been growing at a substantial clip – according to an S-4 registration statement filed in November in conjunction with its Outdoor deal, the channel doubled its cash flow in the first nine months of 2012 to $11.5 million. For the full year 2011, adjusted cash flow at Sportsman Channel was $8.4 million, a 609% increase from the prior year.

Kern added that although losing Outdoor to KSE was “frustrating” for the InterMedia team, the company will continue to do what it does best.

“We were doing fine before it happened, we’ve been doing fine while it was happening and we will re-double our efforts,” Kern said, “Our gang is loaded for bear and ready to go back to fighting it out in the streets.”