Simply put, GSO is a hedge fund that's focused on distressed debt. Of course, with the slowing economy, GSO is in a prime spot to capitalize on some nice opportunities.
For example, when the Weather Channel was up for sale, it was tough to get financing for the deal. So why not GSO?
It worked. In the end, Blackstone and Bain Capital teamed up with General Electric (NYSE: GE) to pull off the acquisition. As for GSO, it provided higher-risk mezzanine debt financing.
Of course there are issues. After all, Blackstone has a conflict. But at the same time, the financial markets are mired in a credit crunch. So, if there are essentially no alternatives, GSO is probably going to provide the best offer.
More importantly, Blackstone realizes that there are some juicy opportunities right now. Thus, by having the GSO advantage, Blackstone certainly is positioned nicely.
Bloomberg, whose personal fortune is estimated by Forbes magazine at $5 billion, can easily afford the buy back the 20% stake in his company that he does not already own. Given its financial condition, Merrill better hope that the New York mayor is willing to open his check book. Other media companies are not going to shell out big bucks for a minority stake in the company where I worked for seven years. This is especially true given that many of Bloomberg's biggest customers in Wall Street are cutting spending given the uncertainties in the world's financial markets.
Maybe the private equity players would be willing to pay up provided that they could see an exit strategy through an IPO. I don't see that happening either. Bloomberg, which the Wall Street Journal says has the right of first refusal for the sale, likes being a private company because it enables it to march to the beat of its own drummer. That was especially true when Mike Bloomberg ran the show.
NBC Universal, which is a part of GE (NYSE: GE), has apparently agreed to shell out $3.5 billion for the Weather Channel. The deal involves a partnership with two marquee private equity firms: Bain Capital LLC and Blackstone Group LP (NYSE: BX).
The transaction has weathered the credit crunch -- as well as survived a gestation period that has gone on for most of 2008. But, in the end, it looks like NBC got a nice deal (keep in mind that it looked like the Weather Channel tried to snag $5 billion or so).
The Weather Channel has extensive distribution (#3 in the US). What's more, there will be synergy with NBC's digital weather property, Weather Plus. Oh, and NBC has lots of experience integrating cable companies, such as Bravo and Sci Fi.
Although, perhaps the most important part of the deal is weather.com, which gets 36+ million unique visitors per month. This ranks it as the #15 site on the web. No doubt, NBC can leverage its advertising -- as well as other websites -- across this virtual real estate.
Finally, the Weather Channel transaction points to a possible new model for private equity; that is, partnering with strategic buyers. It's a good way to deploy capital but also get cost/revenue synergies.
Depending on who is doing the measuring, The Weather Channel is one of the most widely watched 24-hour cable networks. Weather.com is among the top 15 or 20 most visited websites in the U.S. Since there are very few media properties of this size on the block, they are especially valuable.
Landmark, the owner of The Weather Channel, has put it on the block. It wanted $5 billion. The rumors are that it will get $3.5 billion on a good day. The last two companies kicking the tires were Time Warner (NYSE: TWX) and NBC Universal. TWX has apparently dropped out.
Although the media conglomerate has over $9 billion in money coming in as it finishes its spin-off of Time Warner Cable (NYSE: TWC), management cannot afford to be viewed as overanxious. Paying too much for a large asset would not make the new era of shareholder value under recently appointed CEO Jeff Bewkes look like it is off to a terribly good start.
According to The Wall Street Journal (subscription required), "Time Warner withdrew after Landmark told the media company it needed more time to make a decision." That probably means the seller is holding out for more cash.
For Time Warner, it is a shame. Its cable networks, CNN and Turner, do particularly well. Putting The Weather Channel with them would have built that business. Online, TWX has big properties like AOL and CNN.com, making Weather.com a good marriage.
It all made sense, except the price.
Douglas A. McIntyre is an editor at 247wallst.com.
Lately, I've been hearing a lot of chatter about General Electric (NYSE: GE) and its NBC Universal asset (here's one example). Specifically, there's been talk about the future of the movie and television business and its role as a productive member of the GE portfolio. There are a lot of pundits out there who would like to see it sold off; probably a lot of investors would like that, too. Thankfully, CEO Jeffrey Immelt isn't one of them; he has consistently and steadfastly denied that NBC Universal will be offered to buyers in the near future. I hope he retains such opinion, because I definitely think GE needs NBC Universal.
Sure, GE needs to sell things from time to time, the latest example being the conglomerate's desire to dump its appliance division (Peter Cohan agreed with this logic and recently wrote a piece about the subject). But it shouldn't get rid of NBC Universal. Ever. Well, maybe there might be some compelling event in the future that would justify a sale, but I really don't see that happening. Why? Because content is valuable, and GE needs to own a piece of it.
We live in exciting times. The media is changing. New distribution paradigms, driven by digital technologies, are forming all the time. Libraries of films and television shows are going to be valuable well into the future. Think about Universal and its film library. The Mummy, Jurassic Park, E.T., The Bourne Ultimatum, Jaws...you get the picture. NBC Universal will be able to monetize all these franchises and many, many more from the library, as well as ones that have yet to be produced, via the new digital economy.
David Rubenstein, the co-founder of the Carlyle Group, recently predicted we'd see a comeback in private equity deals. Although, the transaction amounts would range from $2 billion to $4 billion.
Well, based on reports from the Wall Street Journal (subscription only), we may see a new deal soon.
That is, the Weather Channel is in the midst of an auction. So far, the leading bidders include: Time Warner (NYSE: TWX) and a partnership of GE (NYSE: GE) and the Blackstone Group (NYSE: BX). It looks like the auction is in the second round.
Now, the GE-Blackstone partnership is interesting. Keep in mind that Blackstone has a long history of such arrangements. Basically, it helps to alleviate the financial burden. Besides, Blackstone has a proven track record of showing cooperation with major corporate alliance partners.
And the price tag for a deal? The range is about $3 billion to $4 billion. Unfortunately, it looks like the parent company of the Weather Channel – Landmark Communications – wanted to fetch $5 billion. But the credit crunch is still taking a toll on valuations.
Maybe I'm weird, but I've always kind of taken The Weather Channel for granted. It's just kinda there and I never really thought it was that valuable.
But the New York Timesis reporting that the station is for sale and is expected to fetch in the neighborhood of $5 billion, with NBC, News Corp, and Comcast among those said to be interested in making a bid.
Why is it worth so much? Because it's breaking news that changes frequently, the station is pretty much impervious to the effect of Tivo, a big draw for advertisers. In addition, the people who rely on the Weather Channel most frequently -- travelers, skiers, etc. -- tend to earn good incomes, another big plus in terms of attracting advertisers.
The Times adds that the station's website, Weather.com, "as the nation's 18th-largest media site by traffic, with more than 32 million unique users in November, according to Nielsen/NetRatings. That is bigger than CNN and Facebook."
On a smaller scale, the station has also produced a CD featuring the smooth jazz that is a hallmark of its broadcast.
If News Corp. does end up landing the network, Rupert Murdoch could end up paying about the same price that he paid for Dow Jones, the parent company of The Wall Street Jounal. But one's thing's for sure: The deal won't generate 1/100th the headlines that one did.
The Weather Channel, held by family-owned Landmark Communications of Virginia, is being auctioned off along with the rest of Landmark, and could fetch $5 billion. A number of public companies may have an interest. According toThe New York Times, firms looking at the property include Comcast (NASDAQ: CMCSA) and General Electric (NYSE: GE).
The Weather Channel is attractive for two reasons. The first is that there are very few large, independent cable networks. Most, including CNN, CNBC, ESPN, and MTV, are already owned by media giants. The chance to pick up another large advertising-supported 24-hour product should be very attractive.
The second tremendous selling point is that weather.com, the online arm of the company, is one of the most-visited sites in the U.S. In November, comScore ranked it as the 16th most-visited website, with 34.1 million unique visitors. That puts it ahead of ESPN.com, CBS.com, and the Viacom (NYSE: VIA) digital properties.
The Weather Channel is a rare prize. The bidding should be spirited.
Douglas A. McIntyre is an editor at 247wallst.com.
On the new personal finance site we're about to launch, I'm contemplating doing a series called "Why Would Anyone Buy That" as a special weekly place to highlight all those consumer products that people buy and I don't understand why.
A soundtrack to The Weather Channel would seem like a pretty good place to start. Weather Channel Presents: Best of Smooth Jazz, released in October, seems like a sure candidate for the discount rack. But, actually, the eight Amazon.com customers who have reviewed it have generally been kind, giving it an average of 4.5 out of 5 stars.
According to the Associated Press, "The songs are among the channel's most requested selections and play during the forecast fixture 'Local on the 8s' that airs six times an hour. It's the cue that draws you to the TV set when you want to find out if you should take along that jacket when you leave home."
I can't imagine buying a CD with "The Weather Channel" in the title: It seems like an invitation to mockery: Possibly even lower than Kenny G and Michael Bolton. But regardless of what I think, you have to hand it to The Weather Channel's marketing people. Who ever would have thought that a station that provides 24-hour coverage of the weather, hardly a scintillating topic to most people, would build a strong enough brand that it can be used to sell CDs.
I can think of a few companies that are struggling to capitalize on their brands that could use some of The Weather Channel's marketing savvy.
The Blackstone Group LP's (NYSE: BX) $930 million purchase of GSO Capital Partners early this year didn't get much fanfare. But so far, it looks like a stellar deal.
NBC Universal, which is a part of 
Depending on who is doing the measuring, The Weather Channel is one of the most widely watched 24-hour cable networks. Weather.com is among the top 15 or 20 most visited websites in the U.S. Since there are very few media properties of this size on the block, they are especially valuable.
David Rubenstein, the co-founder of the 
On the new personal finance site we're about to launch, I'm contemplating doing a series called "Why Would Anyone Buy That" as a special weekly place to highlight all those consumer products that people buy and I don't understand why.
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