Discovery Communications (DISCA: Quote) Friday announced a definitive agreement with Germany's ProSiebenSat.1 Group (PBSFF.PK) to purchase its SBS Nordic operations for a total enterprise value of around $1.7 billion. Additionally, Discovery said its Board of Directors has approved a $1.0 billion increase to its existing stock repurchase program.
The deal, expected to close in early 2013, and strengthen Discovery's long-term growth in the strong Nordic TV markets. The transaction also adds general entertainment, scripted and sports programming to the company's suite of services for the first time, thus expanding its brand portfolio.
The acquisition includes 12 television networks in Norway, Sweden, Denmark and Finland, among other assets.
SBS has the Number 2 television portfolio in Norway with four networks and an overall viewership share of 34 percent and the Number 3 television portfolio in Sweden with two networks and an overall viewership share of 22 percent. In Denmark, it has the Number 3 television portfolio with four networks and an overall viewership share of 19 percent.
SBS Nordic's operations also include two networks in Finland. The deal is also for SBS Nordic's 19 radio stations, including the Number 1 radio portfolio in Sweden, as well as several digital brands.
David Zaslav, president and CEO of Discovery, said, "SBS Nordic has a fully distributed portfolio of dual revenue stream networks with a terrific management team that will expand Discovery's footprint across the Nordic region, which includes some of the most well-penetrated and stable TV markets in the world."
ProSiebenSat.1 said separately that Red Arrow Entertainment Group, its production business in Northern Europe, is not included in the transaction.
The German media group plans to use a partial amount of 500 million euros of the proceeds for a partial prepayment of term debt under its syndicated facilities agreement. The remainder will be used for reinvestments in the business.
If the transaction is successfully consummated and the business is developing in line with expectations, ProSiebenSat.1 intends to propose a total dividend distribution in the order of 1.2 billion euros or around 5.60 per share. In 2012, the company paid 245 million euros in dividends.
Further, ProSiebenSat.1 plans to propose to the coming shareholders' meeting a conversion of its non-voting preference shares into voting common shares.
Additionally, Discovery said it has agreed to buy a 20 percent minority interest in the Eurosport group - Eurosport International and Eurosport France - from French broadcaster TF1 for around 170 million euros.
Discovery may have the option to raise its interest to 51 percent in two years' time. If Discovery exercised its option, TF1 would have the ability to exercise a put option over the remaining 49 percent, which potentially would increase Discovery's ownership to 100 percent.
Discovery will become a shareholder in the TV Breizh, Histoire, Ushuaia TV and Stylia channels, with a 20 percent interest in each that could increase to 49 percent in two years. The acquisition of the 20 percent will involve cash consideration of 14 million euros.
DISCA closed at $60.26 on Thursday.
ProSiebenSat is climbing over 6 percent in Frankfurt at 24.65 euros.
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by RTT Staff Writer
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