Weather Channel Majority Owners Considering a Sale

Courtesy of The Weather Channel
Sam Champion

No deal is imminent but two large equity funds are reportedly talking to investment bankers about putting the channel and related assets up for bid

The two large equity funds that own majority interest in The Weather Channel have been considering selling their stake for at least a year, an informed source tells The Hollywood Reporter.

That gives credence to a Friday report by Bloomberg that Blackstone Group and Bain Capital have talked with JP Morgan Chase & Co. and Goldman Sachs about representing them for a possible sale.

Bloomberg reported that The Weather Channel (TWC) could be sold separately from a weather data service. Besides the cable channel, TWC owns Weather.com, Weather Underground, Intellicast.com, WeatherScan and Weather Services International, which provides weather forecasts.

It is possible that this is just an exercise to determine the value of the service, which reaches about 100 million U.S. TV homes, as well as possible interest. In the end they may decide not to sell.

Blackstone, with headquarters in New York, did not respond to a request for comment. Bain, based in Boston, declined comment. NBCUniversal, a division of Comcast, which holds a minority stake in TWC, declined to comment.

A spokesperson for TWC said they are not aware of any negotiations that could lead to a sale.

The channel was last sold in 2008 for about $3.5 billion and is believed to still be worth about the same amount.

In 2013, TWC averaged about 213,000 viewers a day, which is down slightly from over 260,000 in 2011. It sells ads not just on the size of the audience but also the quality. The channel regularly sees a spike in viewership when bad weather hits.

However, weather is a commodity, and it is available from many sources, which presents a challenge to TWC.

In March, TWC made a high profile hire of Sam Champion, who had been the weather person on Good Morning America. He now is the lead host of AMHQ, the networks morning show. The program has done fairly well but has not met the high expectations in terms of ratings expressed when Champion was hired.

Weather.com is one of the 40 most popular websites on the Internet and also known to generate significant revenue.

In January 2012, the owners brought in David Kenny as CEO. His mandate was to grow the company by expanding digital and mobile services and making it more international. Kenny had been president of Akamai Technologies, a digital technology company, which was sold to a French ad agency. He has a background in the advertising business.

In June 2013, TWC parent company, The Weather Company, paid a dividend of $600 million to its investors. That brought a quick downgrade by Moody’s Investor Service which was concerned the company had taken on too much debt.

However, Moody’s noted in a June 2013 press release that The Weather Company “generates significant free cash flow, with over $100 million expected per year in 2014 and beyond.”

“The current dividend transaction,” reported Moody’s, “demonstrates that NBCU is comfortable with high leverage at TWCC, and signals that it does not view TWCC as a strategic core-asset, but as an opportunistic investment.”

If it is sold, potential buyers could include other cable channel group owners or even a technology company that wants to expand its content offerings. Yahoo is known to have considered acquiring Weather Channel in 2012.

The odds are a buyer would already own cable channels as a key to future success would be to negotiate carriage agreements and fees with multiple system operators. Having a number of popular channels provides leverage in such negotiations. Weather currently commands about 13 cents per subscriber per month from cable systems where it is carried, according to SNL Kagan

TWC deals with distributors are not negotiated by NBCUniversal which owns a lot of other channels.

The difficulty of being a stand-alone was evident early this year when DirecTV pulled TWC off its air for about three months in a dispute over fees. TWC had sought a small increase and DirecTV wanted a reduction in what it paid.

In the end TWC got a very small increase but made major concessions to DirecTV. It agreed to replace about half its primetime programming (which goes beyond just weather reports with weather reports); and also gave DirecTV some TV everywhere rights (so it’s available on tablets, phones and other devices).

That deal got done only after Blackstone Group put pressure on DirecTV by linking the restoration of TWC to another deal involving the Hilton Hotels worldwide. Hilton is owned by Blackstone which agreed to make DirecTV a key supplier of video as part of the eventual settlement.

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