Pair to pony up $320 mil for TW's stake in cable net
Walt Disney Co. is teaming with Comcast Corp. to buy Time Warner’s majority stake in E! Entertainment Television for $320 million, sources said.
In a deal that was signed Thursday and may be announced as early as this week, Disney is expected to shell out the bulk of the cash to buy out Time Warner, although the partnership structure will leave Comcast and its programming arm C3 – which already owns 10.4% of E! – in control of the network. Comcast execs could not be reached for comment Friday, and Disney and Time Warner spokesmen declined comment.
Under the terms of the deal, it is expected that C3 will control 51% of the 70% majority stake, with Disney controlling 49%. C3 CEO and former Disney senior exec Rich Frank will oversee the cable web for the partnership.
The boards of Comcast and Disney are expected to formally approve the deal today. Comcast will notify Time Warner of its intention to buy the stake formally in early February and the deal will close 30 days after that, sources said.
No major plans or shakeups are said to be in the works for E!. The net, which is headed by Lee Masters, has 42 million subscribers and last year broke into the black. The other cable partners in the network – Cox Communications, Continental Cablevision and Tele-Communications Inc.’s Liberty Media – will remain on board for the moment.
Although Disney is putting up the majority of the money for the Time Warner stake, it is understood that there are provisions in the agreement that call for Comcast to pay Disney back over time for its 51% stake. When ITT partnered with Cablevision to buy Madison Square Garden, the former put up the money with the latter also agreeing to pay the former back.
People close to the negotiations said Comcast got a lot of interest, not only from News Corp., NBC and CBS but also Britain’s Carlton Communications and USA Network, among others. Disney chairman Michael Eisner personally led the negotiations for the Mouse House, sources said, and his 20-year relationship with Frank sealed the deal for Disney.
One source said Eisner thinks E! is a “great concept.” “He and Rich Frank had a lot to do with designing ‘Entertainment Tonight.’ They understand entertainment news and how important and powerful for them it is,” the source said.
But people close to the situation say E! needs to move to the next step and needs capital for programming. That need, one person said, was highlighted by E! programming of “Melrose Place” reruns, which he said was “clearly not the next step” for E!.
Exactly what Disney and Comcast plan is not yet clear, sources said. Frank’s job now is to design a business plan for the channel.
E! went up for sale last year after Comcast triggered a buy-sell provision in the ownership partnership. Comcast wanted a partner for the deal to reduce the cost. The deadline for Comcast to strike a deal with Time Warner is set for Feb. 6, and under the agreement, Comcast also has the right to buy out the remaining cablers in five years’ time.
For Disney, a deal to take an ownership stake in E! will expand its cable network holdings, which now consist of the three ESPN networks, the Disney Channel and stakes in Lifetime and the Arts & Entertainment Network. It was Disney’s ownership of ESPN and that cable network’s strong relationship with operators that was said to tilt the deal toward Disney.
Comcast, meanwhile, now will control its first non-home-shopping network. The company also owns QVC with Liberty Media and has regional sports channel holdings, but this marks the cable giant’s first controlling stake in a national entertainment network.
Although Time Warner considers cable networks as part of its growth strategy, its acquisition of Turner Broadcasting gives it plenty of cable webs, and the media giant needs the money to reduce debt.
Time Warner also has a 50% stake in Comedy Central with Viacom, but has yet to give any indications as to whether it might want to unload its interest in that cable web as well.