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Marianne Paskowski



Weather Tests M&A Climate

January 3, 2008 12:55 PM

Landmark Communications president and CEO Decker Anstrom confirmed a report that appeared in the New York Times today that the company has retained JPMorgan Chase to sell the Weather Channel and Lehman Brothers to handle Landmark’s other holdings that include two powerhouse TV stations in Las Vegas and Nashville and several newspapers.

Among the interested buyers of the Weather Channel and its popular weather.com site are General Electric, News Corporation and Comcast Communications. Anstrom told me those companies were potential buyers but also said there were others.

He said he expects the sale to go quickly and that he probably would not be a part of the transition if a sale indeed takes place. “I am the biggest redundancy,” he said about what role he might play with a new owner.

The Weather Channel assets alone are expected to fetch north of $5 billion, but a deal is far from done, although Anstrom suspects it will happen quickly.

Staffers were notified by email that a sale might be pending and business unit managers held town meetings to openly discuss what was going on at the privately held company. A deal indeed sounds imminent, given that employees were given details about severance, 12 weeks for all employees who might be affected, plus two weeks per each year of service.

Whether a deal happens quickly is another story in this economic climate. CNBC reported today that merger and acquisition activity for 2008 has had its slowest start out the gate in eight years.

So, for the oddsmakers out there, which media giant will buy the Weather Channel and how long will the deal take, given the business climate so far?

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Comments (7)

Marianne Paskowski:

More,

This is getting interesting, CNBC's Fast Money thinks Weather's assets are more like $1 billion.

Any thoughts out there?
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Marianne

In theory, all the media conglomerates should all want it. Disney, News Corp., Time Warner, Viacom, NBCU, and Comcast. First, The Weather Channel (TWC) is an established brand that occupies a valuable piece of cable television real estate. Strategically, none of the moguls should want their competitors to get it; they should all want it if for no other reason than to keep the other guy from getting it. Second, even though it only ranked 42nd in the third quarter among ad-supported cable networks, The Weather Channel owns a clearly-identified niche that can be tweaked to become a valuable synergistic marketing tool for the conglomerate. Jeffrey Zucker would know what to do with it. He did it with Bravo, he's doing it with Oxygen, and he'll do it with TWC . Third, if indeed the industry will be compelled to offer cable channels on an a la carte basis, those networks that offer more value-added programs and promotions are more likely to be "chosen" by the consumer. If the conglomerate is smart, it can position TWC to be more valuable to the consumer because of synergistic promotions with other parts of the conglomerate. Finally, it's in the DNA of media conglomerates to buy things up. It's what conglomerates do. They consolidate. The conglomerates and their CEO's have voracious appetites. This handful of men (Iger, Murdoch, Bewkes, Redstone, Immelt, and Roberts) didn't ascend to the top of their respective empires by acquiescing turf. Just the opposite. They are masters of the universe and their job is to own it. As for Landmark's other properties which may or may not be a synergistic fit (i.e. newspapers), each conglomerate should figure out what to do with them, but they should all, in theory and true to their natures, want The Weather Channel.

Marianne Paskowski:

Cory,

The asking price takes into account the success of weather.com, and mobile offerings, that together, are worth more than the cable net.

My two cents, keep on coming back, and let your students chew on this nugget. Remember, M&A activity blows rights now.

Marianne

Dear Marianne,

M&A activity might "blow" right now, but velociraptors must be fed regardless of market conditions.

You're right. This could be a good case study to launch the new semester of Entertainment Marketing, which begins in three weeks.

Thank you for the invitation to come back.

I accept.

Cory

Marianne Paskowski:

Cory,
Love that word velociraptors! Might be a hard topic for your students, Landmark is privately held so they won't be able to Google their way through your course!

Have you done your alma mater yet, Disney? Wall Street is loving that company again.

And it's right in your back yard, the Magic Kingdom,

Marianne

Chi-town Mike:

Cory pretty much stole my whole take on all of this when he said, "Strategically, none of the moguls should want their competitors to get it; they should all want it if for no other reason than to keep the other guy from getting it." I couldn't agree with that statement any more. Personally I don't think anyone really wants the Weather Channel, but they need it because it would only make their competition stronger.

From a consumers point of view, I look upon this as a lose-lose situation. In the past 6 months I've seen a few cable channels disappear from Comcast Cable, and what's left has been frustrating. Take for example MTV or VH1, both being an entertainment outlet for the primary purpose of music videos. MTV I think shows maybe 30 min of videos a day, and VH1 is non-stop with Tyra's Modelathon (Obviously I keep flipping).

So back to the Weather Channel, they do a good job providing weather information with little commercials and I wouldn't be terribly surprised if the new owner flip-flopped that as well. Maybe we can have Tyra's models walking around the set while giving us a forecast. [/sarcasm]

Marianne Paskowski:

Chi,
Much of the value in the Weather family lies in its oneline offerings, not necessarily the cable channel.

Hard to evaluate the price, I'm guessing about $3 bill.

Marianne

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