The Food Network is welcoming the Travel Channel to the family. The bidding war for the Cox Communications' Travel Channel has finally concluded and Scripps Networks Interactive has won a 65 percent stake in the channel, in a deal that values it at around $1 billion.
This rich valuation says a lot about the value in cable — its dual revenue stream has bolstered all the media earnings so far this season — and how rarely cable properties come up for sale.
Travel Channel's has the impressive asset of distribution to 96 million homes. But on the downside subscribers pay only six cents per month for the channel and its estimated yearly cash flow is just north of $50 million.
The deal creates a joint venture in which Scripps has the controlling stake.
Scripps is contributing $181 million in cash and then the two parent companies will take on $878 million in debt that will be guaranteed by Scripps with the proceeds going to Cox. All-in the joint partnership will carry about $700 million in net debt. The deal is expected to be finalized by January. Cox isn't selling the whole channel in order to minimize its tax bill.
The Travel Channel, and the potential in that brand, makes sense for Scripps, which owns the Food Network and HGTV. It has some high-profile shows like Anthony Bourdain's "No Reservations," but it seems like the idea of the channel should allow its expansion further into the territory of Discovery or 'National Geographic' adventure-travel shows. Especially as Scripps looks to expand overseas, the Travel Channel seems like a good way to make that jump.
Speaking of National Geographic, Travel could have also been a good fit for its parent, News Corp , which was also a top contender for the channel. Yesterday on News Corp's conference call CEO Rupert Murdoch and Chase Carey refused to comment on bidding, and the way they did so seemed to implicitly acknowledge their involvement in negotiations.
How much could this help Scripps? The cable division split off from E.W. Scripps, the newspaper company, in July 2008 to better allow investors to access cable's growth. Due to the deal, Scripps Network Interactive will report its earnings on Friday instead of Thursday.
We'll see what the company says about its additive effect.
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