Time Warner Makes $1.4B Offer For Endemol
One insider familiar with the negotiations describes Time Warner’s bid for the debt-laden Dutch TV company as “rock bottom.” I’m told Endemol’s owners consider the Time Warner bid “ridiculously low.” It comes to seven times Endemol’s expected $192M earnings this year before interest, tax, depreciation and amortization (EBITDA). It’s anybody’s guess as to whether that’s enough for Endemol’s three owners — Silvio Berlusconi’s Mediaset, Goldman Sachs’ Capital Partners and Endemol founder John De Mol’s investment vehicle Cyrte. I’m told that Cyrte wooed Ronald Goes, head of international TV production at Warner Bros, into making the bid; the Dutch Time Warner executive used to be COO of Endemol. “His job is to do this kind of deal,” says media analyst Claire Enders. “His view is that Endemol has significant assets that can be built up.” Still, the offer illustrates how big a premium Rupert Murdoch paid for his daughter Elisabeth’s Shine Group: He shelled out $675M, valuing Shine at roughly 12 times EBITDA. That’s a huge difference: Endemol generates strong cash flow, even though it is desperate to wipe away at least $2.7B from the $3.8B it owes lenders. The Big Brother producer’s largest creditors include private equity funds Apollo Management, Centerbridge and Providence Equity Partners, and banks such as Barclays and RBS. The three shareholders are trying to persuade creditors to write off debt in exchange for equity. Separately, Mediaset has tried persuading UK broadcaster ITV to also buy the company.
“It’s an incredibly complicated situation because of the debt-for-equity swap,” says one insider. “Time Warner’s bid is unlikely to go through at this level, but if it raises the bid to E1.5 billion, they might be interested.” Time Warner’s lowball bid also could lead NBC Universal and Sony to jump in. European broadcasters Bertelsmann and RTL have also kicked the tires. Private-equity firm Permira looked for offers of about 8.5 times EBITDA when it tried to offload All3Media, another independent European TV producer. Permira yanked that sale because it could not find buyers at the level it was looking for. “The Time Warner offer is going to be hanging around for some time and it won’t go forward unless it’s increased,” Enders tells me. “It’s a signal for other bids to emerge. This is a a slow-motion process that’s going to take at least six months. Time Warner is signaling that they’re available to talk.”


another good (and better) comp for the overpayment for Shine is the recent sale of CKX….
Run away! Huge debt and shows that are running out of steam? I’d stay away!
You are absolutely right. To put this into relation with Shine is a bit of a joke.
Endemol is in total distress. Cash flow isn’t nearly enough to keep the covenants of all lender agreements and the company is loaded with debt on many levels. If they do not restructure and owners and most important lenders agree to a hefty cut, this company will default (it actually is, only saved by a pushed deadline of the lenders).
There is no creative leadership structure and since a couple of years their output is zilch. Creatively Endemol had no real global profitable hit since I guess Deal or No Deal. All their moneymaking shows are end of their life cycle.
If you look at life cycle of the company, Endemol is clearly over the hump with a lot of crucial key people gone (not talking about Ynon).
You need to invest a lot of money to stabilize, revitalize and rehire
Shine is young, vital and creative with a lot of regionally hot companies. Still, a multiple of 12 is a lot. But not ridiculously higher than other deals.
200 million in Ebitda against 4 BILLION in debt?.. Seems like one hell of an offer.
Doesn’t really show anything until a deal closes…
How did Endemol get so far in debt? Through purchases?
And while Endemol is now in scripted, does this show
a future value or potential value for reality programming?
You accountants are SOOOOOOO interesting…
While the Shine price was high, the Warner bid is a low-ball bid – and a smart move.
There are two differences between these deals: (a) one is a distressed sale and the other is not; and (b) growth potential.
(a) Warner knows that the sellers need to dispose of the asset and is being astute in making a bid at this stage – and making it public that they have done so. Endemol’s lenders would be brave to reject it, because the only other likely bidders are public companies who will not want to appear to the market that they have overpaid in the current market. The alternative is a PE buyer, but high prices for creative businesses in this market are next to impossible to achieve. So Warner may allow itself to be negotiated up slightly, but this bear hug will be difficult to resist.
(b) Multiples are a proxy for growth potential. Low multiple = low growth prospects, and the opposite is also true. Sadly for Endemol’s lenders, they have a relatively mature business (i.e low growth) which they need to sell, so it is inevitable that the exit multiple will be low. The fact that they lent to it to drive growth is reflective of how times have changed – lenders then needed to add assets and therefore were willing to believe growth stories that they would not accept today, so they know that their loans are in danger and they will have to take a haircut. The question is how big will it be?
It is not clear whether Shine has the potential to grow into its acquisition multiple, but this price is not off the scale given multiples paid for other production companies – including All3Media.
The All3Media sale/non-sale is a reflection of the same dynamics: Permira is not a distressed seller; and it bought at a high EBITDA multiple, so doesn’t want to sell at a low multiple unless it needs to – which it doesn’t (yet?…). The recent profit performance of All3Media has been good, but one could argue that ongoing growth will be harder to find so it is difficult to give it a “growth” rating as a stand-alone business (i.e. EBIT multiple >10); once again the only logical buyers would be the big listed media groups (because they could derive cost savings and other synergies, which enhance profits in their hands) but they don’t want to be seen to pay too much. So the solution is to wait until there is more pricing tension in the market, either when P/E ratios in public markets improve, or when the PE feeding frenzy re-starts. Of course this assumes that things get better and not worse….
Damn, nice analysis. Thanks for the knowledge!
Earnings before interest, tax, depreciation and amortisation estimated to be between €135m and €150m this year.