In the wake of Time Warner’s placing a monetary value on E! Entertainment Television on Dec. 9, the MSO partners who own stakes in the network – Cox, Comcast, Continental and Liberty/TCI – have until early February to determine if they want to buy out Time Warner’s 58% interest in E! or sell their shares to the corporation.
According to sources, that value estimate of E! was about $500 million, which E! prexy and CEO Lee Masters, without confirming the price, called “a bargain.”
“I think the company is worth a great deal more than the price that was struck and could fetch more on the open market,” Masters said. “I’ve seen Wall Street estimates of between $660 million and $750 million, and I think the channel would trade in that range if sold to an independent third party.”
The probable change in the E! ownership stakes was sparked by Comcast Corp., which over the summer triggered a buy-sell clause that prompted Time Warner to set a purchase price for the channel.. With the Dec. 9 announcement, the ball is now in the court of the MSOs, with a 60-day window to make a decision.
Each of the MSO partners carries a 10.5% stake in E!, and each could repurchase their current shares plus a percentage of Time Warner’s controlling stake based TW’s price on the table. There also is the less likely possibility of a third party laying out a great premium over the established price.
Holding their breath
Those familiar with the deal at E! are holding their breath for an MSO group equity buyout of Time Warner, since that scenario holds the best possibility for the channel to continue as-is.
“The interests of the MSO group lie in getting more involved in programming,” Masters said, “and clearly they could use E! as the core asset around which to build that.”
The MSO owners would likewise instantly increase E!’s distribution on all their systems, ensuring greater subscriber expansion.
Masters believes that if Time Warner were to become E!’s sole owner, there is a “high probability” that the company would be merged into the Turner Broadcasting empire in order to save money. That possibility also could hit E! squarely in its subscriber base, since cable operators would be far less motivated to give the channel a home.
E! insiders skittish
There also are fears inside E! that a Time Warner buyout of the MSOs could result in meddling with the E! programming philosophy and on-air product. And the surfacing of an independent third party, with its unknown element, also makes E! insiders skittish.
Officials at Comcast, Continental, Cox and TCI failed to return calls Monday. And Masters, due to a confidentiality clause in the ownership contract, is barred from revealing the pricetag placed on the channel. But Masters said as recently as two months ago that he believed E! had increased in value to the $600 million to $700 million range.
If that is true, then E!’s worth will have doubled in just two years from the $250 million to $325 million estimate of early ’95. As recently as 1993, a red ink-stained E! was valued at a mere $50 million. So even $500 million is a 1,000% increase in four years.
“I think the company is worth a great deal now,” Masters said. “We’ve built a terrific asset here that’s worth a lot of money, and it will only get bigger over the next 5-10 years. I think that everyone wants more of us.”