NBC Likely to Deal for Bravo

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Cablevision Systems Corp. could be close to a deal to sell its Bravo cable network to General Electric Co.'s NBC television unit in a stock-and-cash deal worth about $1.2 billion, or about 20 times Bravo's estimated 2002 cash flow of $65 million.

According to published reports, NBC, which already owns a 21 percent stake in Rainbow Media Corp. — the Cablevision programming arm that includes Bravo — would swap its interest in the Bethpage, N.Y., MSO for the remaining interest in Bravo, plus cash.

Aside from the Bravo stake, NBC owns about 53 million Cablevision shares.

Speculation that a deal was in the works was fueled by a late Oct. 4 NBC filing, in which the Peacock Network said it continues to evaluate its position in the MSO, and could attempt to monetize it or exchange it for Cablevision's other assets.

Both Rainbow Media and NBC declined comment.

This isn't the first time Cablevision has tried to sell its programming assets. In 2000, the MSO puts its Rainbow assets up for auction — attracting bids as high as $4 billion — but later pulled them off the block.

While Cablevision and NBC appear close to a deal, this most recent attempt to sell programming assets could have the same fate. The big difference this time is that Cablevision needs cash. For months, the MSO has been under pressure to raise cash to bridge a $500 million to $1 billion funding shortfall in 2003.

"It's unfortunate if they've got to sell properties in this market," said SunTrust Robinson Humphrey analyst Gary Farber. "Six or seven months ago, you may have thought otherwise, but at this point almost anything to get the leverage down is positive. You'd rather see them pay down debt than take out their partner."

The value of the transaction to Cablevision depends on how much cash is included in the deal, ranging from as little as $200 million to more than $500 million.

According to some analysts, Bravo's estimated 2002 cash flow is about $65 million. Assigning a 20 times multiple to that number gives you $1.2 billion.

Because it holds an 80 percent interest in Bravo, Cablevision would stand to receive about $960 million from the deal. The cash portion would hinge on the value placed on NBC's Cablevision shares.

At 4 p.m. Oct. 10, Cablevision stock was priced at $7.02 per share (up 1 cent each), making NBC's stake worth about $372 million, which would leave the cash portion of the deal at $588 million.

Sources said NBC is pushing for a higher valuation of its Cablevision stock, which would drive down the cash portion of the deal.

Bravo, which has been bulking up its programming roster with more original programming and acquisitions — including former Home Box Office staple The Larry Sanders Show
and the scrapped Turner Network Television entry Breaking News
— reaches a small but affluent audience.

According to a Turner Entertainment Research analysis of Nielsen Media Research data, the network's household ratings declined 25 percent to a 0.3 in primetime during the 2001-2002 TV season, spanning Oct. 1, 2001 through Sept. 29, 2002, from a 0.4 in the 2000-01 season.

Results were better on the demographic front in primetime, though, as Bravo notched 7 percent increases among adults 18 to 49 and adults 25 to 54, for an average of 112,000 and 131,000 of those respective viewers, during the last TV season.

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