Kroenke Outlasts InterMedia in Outdoor Quest

$267 Million Offer is 19 Times Net's Cash Flow
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Billionaire sports mogul Stan Kroenke appeared victorious in last week’s back-and forth bidding for The Outdoor Channel, prevailing with a $10.25-per-share all-cash offer for the hunting and fishing channel on May 8.

And though no one is anticipating a competing bid for the channel from Kroenke’s chief opponent in the deal, InterMedia Partners, the higher price raises questions as to Kroenke’s plans for the network and whether he is willing to pump additional capital into new content for the 40-million subscriber channel.

Kroenke Sports & Entertainment’s latest bid was about $40 million higher than the $8.75 per-share offer KSE made for the channel in March. The total price — about $267 million — represents a multiple of about 19 times the channel’s annual cash flow.

ACQUISITION SPRINGBOARD?

While that appears pricey compared to past programming deals that have averaged about 10 times range, it is lower than others that were made simply to acquire subscribers with no plans to continue an ongoing business. For example, Al Jazeera’s $500 million purchase of low-rated Current TV carried a 132 times cash flow multiple.

Noble Financial Capital Markets media analyst Michael Kupinski said the KSE bid doesn’t appear to be that pricey considering the $12 per-share valuation he had on Outdoor stock. He added that, depending on what KSE’s plans are for the network, the price could still be a bargain.

“Kroenke has some sports businesses that he might pull together [with Outdoor],” Kupinski said. “He has enough cash to make the acquisition and maybe he’s viewing it as a centerpiece for other acquisitions he might make. In that way, it makes sense.”

Outdoor is small (at 39.8 million subscribers) but profitable and has funded operations to date through its own cash-flow generation. Kupinski said the channel also has a steady base of advertisers and, with KSE, gets a deep-pocketed owner. Kroenke is the 92nd richest man in America, worth an estimated $5 billion, according to Forbes. In addition to several sports teams, KSE owns Denver regional sports network Altitude Sports and the World Fishing Network.

Officials at KSE did not return a request for comment.

Peter Kern, managing partner of InterMedia, which owns Sportsman Channel, told Multichannel News last Thursday (May 9) the company had no intention of trying to top Kroenke’s latest offer.

“I suppose this is the end,” Kern said. “It’s getting ridiculous. We always knew he had the resources to do whatever he wanted. Why this thing is worth 19 times EBITDA to him, I may never know.”

SPORTSMAN’S NEXT MOVE

Kern said InterMedia would focus its efforts on the Sportsman Channel and its 15 magazine properties. He said the company has no immediate plans to find another acquisition target in the space. “We’ve had our fun,” he said. “Our goal is to put our blinders on and just deliver on the business.”

Outdoor Channel said in a statement it unanimously approved the KSE merger agreement and recommends that its shareholders vote in favor of the Kroenke deal at a special meeting, which it anticipates will be held sometime on or before May 14.

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