Target: The Weather Channel
Sponsors: Bain Capital, The Blackstone Group, NBC Universal
Seller: Landmark Communications
Financial Adviser: Sponsor: Deutsche Bank AG, Allen & Co., Credit Suisse; Seller: JP Morgan, Willcox & Savage
Legal Counsel: Sponsor: Weil Gotshal & Manges LLP, Ropes & Gray; Seller: Willcox & Savage, Kilpatrick Stockton
In the last year, buyout firms have been forced to cut larger equity checks to get deals done. But with The
“It would have been very hard for a private equity firm to pursue [The Weather Channel] by itself,” said a source close to the buyout firms. Our source explained that his firm’s partnership with NBC Universal helped the buyout firms gain financing commitments for the privately held TV, Internet and mobile media company. Lenders might not have agreed to a purely financial deal, our source said.
But even with the backing of an investment-grade strategic buyer, the sponsors ended up tapping their in-house debt providers for credit. Funding for the deal came from Blackstone Group’s
The firms justified their large equity checks, which add up to half the purchase price, in part on The Weather Channel’s growth rate. The company’s cable television business is growing at a 5 percent to 8 percent rate; its Internet business is growing faster than 20 percent; its mobile business is just beginning to take off. Further, the company’s market share for weather information is 5x that of its closest competitor.
Bain Capital, Blackstone Group, and NBC Universal each paid one third of the equity check, amounting to roughly $566 million each. The co-owners have equal representation on The Weather Channel’s board of directors.
The positive effects of NBC Universal’s involvement in the deal didn’t stop at financing. The Weather Channel’s inability to stand alone as an independent company added another benefit to the partnership. The company was owned by Landmark Communications, a family-owned media company that’s selling its businesses piecemeal. The Weather Channel was widely seen as Landmark’s most attractive asset, but our source close to the buyout firms said that “it needs a larger platform like NBC.” The strategic buyer offers back office support, cross-promotional opportunities, and management support not available to an independent entity.
Despite the benefits NBC Universal offers The Weather Channel, the company’s backers have varying motives: Bain Capital and Blackstone Group will need to exit at some point, whereas NBC Universal may not. So instead of permanently folding The Weather Channel into the rest of NBC Universal or one of the firms’ other media holdings, the business will remain independent.
Persistent rumors that GE could sell NBC Universal have increased in pitch as stagnant earnings have put pressure on GE to narrow its diverse holdings; it’s already announced a plan to sell its appliance business, long considered the cornerstone of its operations. Divesting NBC Universal would open the door for a host of long-term possibilities for the LBO shops, The Weather Channel, and NBC Universal.