One Equity Eyes Expansion Of TV Guide

Target: TV Guide Network and

Price: $123 million

Sponsor: One Equity Partners

Seller: Lions Gate Entertainment Corp.

Financial Adviser: Sponsor: JPMorganChase

Legal Adviser: Sponsor: Gibson, Dunn & Crutcher LLP

One Equity Partners is in advanced discussions with two television stations it’s targeting as potential add-ons for its new television platform. The talks come after the New York-based firm, which manages the private equity investments of JPMorgan Chase & Co., completed its purchase of a 49 percent stake in TV Guide Networks Inc., which also includes TV, for $123 million from Lions Gate Entertainment Corp. on May 28.

Greg O’Hara, a partner with One Equity, declined to discuss the potential targets in detail but said adding more channels to the platform is part of a larger plan to dramatically change the TV Guide property. He expects the expanded content to fuel the transformation. TV Guide network typically features scrolling channel listings, with additional programming taking up about a one-third of the screen. “You can understand why that’s not super-fulfilling content,” O’Hara said.

It’s also increasingly obsolete, O’Hara explained. With the government-mandated conversion to all digital television broadcasting from analog already in process, most television remote controls now feature an information button that can provide channel listings.

O’Hara and his colleagues at One Equity still felt that TV Guide was undervalued, however, considering that it offered an almost blank slate entry into television programming. The firm’s plan is pretty straightforward: increase and improve content, which in turn should generate more advertising revenue, which in turn should lead to a healthy return down the road. TV Guide network reaches more than 80 million households, and about 19 million people visit and its related sites on a monthly basis.

Executives at One Equity, who have no experience running television stations, teamed up for the deal with media executive Allen Shapiro. Shapiro was most recently president of Mosaic Media Group, a Los Angeles-based movie production and artist management firm. He also participated in the 2002 buyout of Dick Clark Productions Inc. At TV Guide, Shapiro will serve as chairman alongside Lions Gate CEO Jon Feltheimer.

The deal comes mere months after Lions Gate outbid One Equity to buy TV Guide for $255 million from Macrovision on Feb. 28. One Equity has the option of purchasing an additional one percent of the company under certain conditions. On June 1, Lions Gate, which is 14.5 percent owned by activist investor Carl Icahn, reported a net loss of $163 million on revenue of $1.47 billion for its fiscal year 2009, which ended in March. Revenue included a $10.3 million contribution from the company’s month-long ownership of the TV Guide business.

Andrew Sriubas and Christa Thomas, a managing director and senior relationship executive, respectively, at JPMorgan, brokered the deal for One Equity.

The deal was a straight equity investment by the firm, though One Equity may layer in some debt financing as the investment matures, O’Hara said.

One Equity typically invests between $50 million and $200 million per transaction, according to its Web site. The firm looks to act as the lead equity investor in management-led buyouts and it places an emphasis on corporate partnerships and divestitures.