When it comes to M&A on Wall Street, the old saying “When it rains, it pours,” usually applies. And while that certainly is the case with recent mergers in the world of media, it is quite apt when talking about The Weather Channel. Several reports claim Comcast’s (CMCSA) NBCUniversal unit and its private equity partners have hired bankers to explore a sale. NBCUniversal and the private equity investors paid $3.8 billion for the Weather Channel back in 2008.
On its face, as a cable operator and content creator, it doesn’t necessarily make sense why Comcast would want to unload The Weather Channel, which is ostensibly a money-making venture. Yahoo Finance senior columnist Mike Santoli has an idea why.
“Well my guess is it's actually the private equity partners that really want to sell,” he says in the attached video. “Comcast probably doesn't necessarily have any urgency to try and raise cash in this business, but of course when you are a co-investor with the buyout firms - what they do is sell what they bought - that's what's probably happening here.”
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The reports of The Weather Channel on the selling block also suggest the parties are open to selling the digital unit separately, if need be. The digital unit contains The Weather Channel’s Weather.com website, Weather Underground, and Weather Services International. Santoli believes this is the right strategy for the sellers to pursue.
“It makes sense because the likely buyers won't necessarily have very much interest in a basic cable outlet like The Weather Channel, where, yes, they still make money but it's certainly not a growth business,” he says. Of particular interest to buyers is the back-end functionality of these sites that could be be packaged and sold, producing new revenue streams.
As media companies try to figure out what their business will look like in five years, perhaps even next year, digital will continue to stay in focus. In fact Santoli notes Comcast just splashed $200 million on social news website Buzzfeed only days ago. This likely means more shakeups in the industry, and more deals in the pipeline, as cash-rich companies try to capture where the eyeballs are going with new investments.
“I think this is something the market in general is coming to terms with right now,” Santoli observes, as the deals that arise are likely going to fall into one of two camps. “[Buyers] are going to be separating these businesses perhaps into the growth areas, the ones that do have a fast growing future, and those that really are going to end up being more likely cash cows.”
For big media companies like Disney (DIS) and Comcast, does this mean more investments in digital companies like Buzzfeed and Maker Studios, and the sale of slow growth businesses broadcast and cable channels? Let us know in the comments section or below, or on Facebook.
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