AMSTERDAM — In what could be described as a Euro version of the America Online/Time Warner deal from earlier this year, broadband player United PanEurope Communications (UPC) will acquire all of the assets of the pan-Euro station group SBS Broadcasting.
In a pact inked Thursday between the two companies, UPC, which already owns 18% of SBS, will make an offer to acquire the rest of the station group in a $2.8 billion stock and cash transaction, based on UPC’s current stock price, that values SBS at approximately $85.14 a share. SBS operates 10 TV stations in eight European territories.
SBS shares closed Thursday on the Nasdaq at $72.50, up $15.50. UPC, also on the Nasdaq board, closed at $220 per share, down $17.
Short on content
The deal brings together two American-originated players, both heavily investing in the distribution of content in traditional and new-media outlets. Neither company owns the rights to substantial programming content, however.
Harry Sloan, chairman-CEO of SBS, told Daily Variety the pact “would build a powerfully new vertically and horizontally integrated multimedia company across Europe.”
Calling the acquisition of SBS a “marriage of assets,” Mark Schneider, chairman and chief executive of UPC, added, “We’ve spent a long time walking up this aisle.”
The cable, broadcast, programming and Internet assets of the enlarged new company will cover 18 territories and involve several media platforms.
Sloan declined to say what his role will be in the enlarged UPC but it is believed that he will likely top UPC Media, which will consolidate the assets of SBS Broadcasting and UPC’s existing programming arm, and subscription TV channel launcher UPCtv.
Deal in cards
The melding of UPC and SBS in some form or another was not unexpected, but the price for SBS was.
“It’s a hell of a pricetag, but then UPC is not shy about spending money,” noted Henk Slotboom, an Amsterdam-based media analyst with Swiss investment bank Julius Baer, referring to UPC’s blazing an acquisition trail across Europe since it launched its IPO little over a year ago.
Under the terms of the deal, UPC will acquire all of the issued and outstanding shares of SBS for $40 a share in cash and the rest in UPC stock.
The transaction will likely be financed through a recent junk bond through which UPC raised some 1.6 billion euros ($1.55 billion), in combination with existing resources.
UPC is the largest private cable company in Europe, with big ambitions in the broadband Internet business. Programming wing UPCtv already has launched a raft of subscription channels across Benelux, Scandinavia, Poland and other territories where it operates.
SBS assets, mainly in medium and smaller markets in Europe, include 10 TV channels, 18 radio stations and a growing cluster of content, promotional and destination Web sites.
Both companies operate in similar markets and have been cooperating for close to a year across a number of areas, but in late January, UPC signaled a portent of things to come when it hiked its stake in SBS to 18%, making it the largest shareholder.
At that time, the companies announced that they planned to create a broadly integrated partnership across new and traditional media, including the roll-out of additional subscription channels across Europe, as well as the development of entertainment portals and content for Euro Internet users.
Both companies have licensed the rights to major content packages, some of which are long-term deals, but neither really own much of their own content.
Citing current runaway hit “The Bus” on its Dutch channel, of which SBS owns 50% of the rights, Sloan pointed out that SBS has been building content locally for several years and it would remain a priority in the enlarged UPC.
Said Sloan: “Local content will play a critical role in the cable world as we develop thematic channels and in the Internet world as we develop entertainment portals.”
The deal is expected to go through “in the next three to four months,” said Sloan, who is being nominated to join UPC’s supervisory board.
UPC is owned 60% by Denver-based UnitedGlobalCom. SBS Broadcasting is a Luxembourg-registered company founded by U.S. entertainment entrepreneur Sloan. Both companies trade on the Nasdaq and on Holland’s AEX.