Scripps Buys Stake in Poland’s TVN

Deal Valued at $1.5B, Including Assumed Debt
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Scripps Networks Interactive acquired what it hopes will be the lynchpin in its international strategy, buying a 53% interest in Polish broadcaster, satellite TV, online and pat TV content provider TVN from ITI Group and Canal Plus Group in a deal valued at about $1.5 billion, including assumed debt.

According to Scripps, the U.S. content company will pay about $613 million in cash and assume about $882 million in TVN debt. Based in Warsaw, TVN includes a portfolio of free-to-air and pay TV lifestyle and entertainment channels including TVN, TVN 7, TVN Style, TTV, TVN Turbo and Poland’s leading 24-hour news channel (TVN 24) and business news channel (TVN 24 Biznes i Swiat).

Scripps Networks expects to close the deal early in the second half of this year. As per Polish law, Scripps will be required to tender for an additional 13% of the company at closing, ending with a 66% interest in TVN.

In a  note to clients, Evercore ISI Group media analysts Vijay Jayant and David Joyce wrote that while the TVN purchase may be a little expensive, it gives Scripps an inroad in what could be a lucrative market. Poland is one of the more established TV markets in Eastern Europe – it has a population of about 39 million people, 12.9 million TV households, 89% multichannel penetration and 54% broadband penetration, according to SNL Kagan.

“Strategically, this could be an important platform for SNI to leverage its existing library, apply its current formats, and use as a springboard for further European channel expansion,” Jayant and Joyce wrote.  

In a conference call with analysts, Scripps chairman and CEO Ken Lowe said TVN represents a strong growth opportunity for the programmer – Poland is one of the fastest growing TV markets in Europe.

“This deal provides Scripps with a solid presence and will be a key pillar of our international operations,” Lowe said on the conference call.

While Scripps backed off on the notion of TVN being a vehicle to roll up broadcasters in the region, the company’s programming and distribution assets – it owns a 32% stake in Poland’s leading satellite TV company nc+ and over-the-top service, TVN Player. In addition, TVN also has an in-house production arm and TVN produces 2,300 hours of original content each year.

The addition of TVN will immediately boost Scripps international scale. TVN had about $403 million in revenue in 2014, up about 4%, while adjusted cash flow increased 5% to about 184 million.

Lowe said on the conference call that after the deal is closed, the contribution to total consolidated revenue from international sources will increase nearly six-fold from about 3% to 17%. On a pro forma basis, Lowe said international will make up about one-quarter of SNI’s total business.

“This is an important step,” Lowe said. “We have frequently said we seek to invest in areas in which we see a great potential for growth. This investment represents precisely that investment philosophy.”

The Scripps Networks purchase mirrors what other content companies have done in recent years to offset declines in the domestic advertising market, especially Discovery Communications, which derives more than half of its overall revenue from outside of the U.S. While Scripps has had an international presence prior to the TVN deal – in 2011 it formed a joint venture with BBC Worldwide in the United Kingdom and its seven lifestyle brands (Food, HGTV, DIY, Travel Channel, Cooking Channel, Fine Living and Asian Food Channel) reach about 200 million homes in 180 countries – this is its biggest push into Eastern Europe.

According to Scripps, TVN is an advertising powerhouse – it secured about 33% of the ad market in Poland for its portfolio of networks as well as selling advertising for a number of other commercial broadcasters in the country.

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