Occasionally, one opens the paper or clicks on news and its all about media. It is such a day, apologies in advance for the lengthy post - but - its all important stuff. But, before we get to the grind of who is buying who and why, I came across this great Future of Media report by Ross Dawson, chairman of Future Exploration Network, a global events and consulting firm specializing in the future of business. It can be downloaded here: http://www.rossdawsonblog.com/Future_of_Media_Report2007.pdf or I have uploaded it below with permission from the authors.
1. Liberty considers move on Virgin Media, Source: Financial Times, Reuters and others.
Terra Firma looks set this week finally to buy EMI after the buy-out fund secured a last-minute extension for its £2.4bn ($4.9bn) agreed deal from the UK Takeover Panel. Guy Hands, founder of Terra Firma, now has until 1pm on Wednesday to secure acceptances from 90 per cent of the shareholders to close the 265p-a-share deal and secure guaranteed funding from Citigroup, the investment bank. The original deadline was 1pm on Sunday. On Friday evening, Terra Firma had the backing of 85 per cent of shareholders.
The extension comes after a tense week, with Terra Firma rushing to secure the acceptances. Shareholders had been sitting on the shares through the offer period because they thought Warner Music might make a counter-bid for the company. It was only ten days ago that the rival business confirmed it did not have such plans.
A person close to the companies said on Sunday Terra Firma was confident it would hit 90 per cent acceptance by Wednesday. Rather than seeking the extension, Mr Hands could have asked Citigroup – which is advising Terra Firma and EMI on the deal – to waive the 90 per cent acceptance level required to guarantee the funding.
Investment banks typically will waive the 90 per cent formal requirement, but not until the closure of the deal. However, tightening credit markets have put banks under pressure not to take on more debt. A source close to Terra Firma said on Sunday that Mr Hands would not renegotiate the debt arrangements should it not reach the acceptance threshold. However, abandoning Terra Firma and EMI would be “suicidal” for the bank’s relationship with two of its best UK clients, said another person close to the deal last week. Even if the deal goes as planned, credit market conditions could force Terra Firma to pay more for the £3.5bn debt package while Citigroup could be left holding a larger chunk of the loan than it counted on. Investment bankers said any hard line from Citigroup could merely be a tactic to secure better terms on the package it puts together to replace Terra Firma’s temporary financing. Copyright The Financial Times Limited 2007
5. Who is John Malone? Cable rag-bag becomes Malone’s ‘perfect child’
There has been much discussion in my finance focused world of when the Bear market would return.
In fact about three weeks ago, perhaps, four over what was meant to be a friendly coffee with an old friend who has done very well for herself in the world of venture (read very big bucks$$$$$) - I was on the receiving end of advice which went along the lines of:
1) You need to get yourself a full-time job
2) The sky will be falling, very soon
3) And you need to grow up, anyway and give up this idea of setting up something of your own.
My response was to ask - so when is the sky falling? Well, its always good for a girl to have timelines especially if her world is going to come to an end.
And, the response, maybe six months, maybe twelve months, maybe tomorrow.
Hmm...three weeks later. Maybe, I do need to a get a day job? Anyone looking to employ a moderately intelligent, new media/music loving, clothes obsessed - clotheshorse - who has a mean entrepreneurial streak?
On the other hand, who knows what tomorrow is going to bring. And I always did say, that people should seriously consider venture capital, as the good times weren't going to go on forever!
Fears about an end to the leveraged buy-out boom sparked heavy selling of global equities on Thursday, triggering the FTSE 100’s worst one-day slide for more than four years.
Private equity buy-outs and takeover speculation have boosted share prices for some time, but turmoil in the credit markets now threatens to make funding of deals more difficult.
The FTSE 100 dropped more than 200 points, or 3.2 per cent, to 6,251.2, its biggest drop since March 2003 in the run-up to the Iraq war. The FTSE Eurofirst 300 index fell 2.8 per cent, its worst day since February.
In New York, the Dow Jones Industrial Average closed down more than 300 points or 2.3 per cent at 13,473.57.
A broad flight to safety also saw marked strengthening of the yen and gains for government bonds. Rising oil prices and growing fears about the US housing market have aggravated investor anxieties.
Globally, investment bank stocks fell on fears they will have to use their own balance sheets to fund more of the finance they have committed to provide on leveraged buy-outs.
This week, banks gave up their attempt to sell to investors $20bn of debt related to the buy-outs of Chrysler and Alliance Boots.
A Financial Times analysis shows this takes to more than $40bn the amount of high-yield debt banks have taken on their balance sheets that was meant to be sold in the past few weeks. Leading bankers say the market for selling leveraged debt is in effect closed for the moment, but lenders are facing a pipeline of commitments for the rest of the year, estimated at more than $300bn in the US alone.
The biggest lenders are the large commercial banks such as JPMorgan Chase, Bank of America and Citigroup. But the investment banks, led by Goldman Sachs, have dramatically scaled up their commitments to leveraged buy-outs this year.
According to regulatory filings, Goldman, Morgan Stanley, Lehman Brothers and Bear Stearns had combined non-investment grade commitments of about $180bn at the end of May. The bulk of this figure relates to commitments on leveraged buy-outs.
None of the banks would say what had happened to their level of commitments since the end of May but bankers said the combined figure appeared high in relation to the estimated total pipeline figures.
The S&P investment bank index fell 3.3 per cent at in New York, with the broader S&P financials index down 2.4 per cent.
Ronan Carr, equity strategist at Morgan Stanley, said: “Bad news has been building for months and these worries have now come to a head.”
Financial stocks bore the brunt of much of the London sell-off, with Legal & General, which also reported disappointing interim figures, down 8.2 per cent.
Copyright The Financial Times Limited 2007
A very interesting piece and loved Murdoch being described as a tough old bird!
Blue Sky's thinking to rule the world
David Nicholson examines where the broadcaster stands after a heated corporate brouhaha
Source: Independent July 22nd, 2007
When BSkyB reveals its results on Friday, broadcasting industry watchers will be keen to detect whether its dual rows with rival Virgin Media and media regulator Ofcom have had any impact on its position.
What has BSkyB been arguing about?
Earlier this year BSkyB decided to raise the prices it charged Virgin Media to broadcast three of its channels (SkyOne, Sky News and Sky Sports News). Virgin claimed that the satellite broadcaster wanted 70 per cent more and refused to pay, so BSkyB removed the channels on 1 March, to the irritation of many of the cable group's customers. Virgin Media admits that it lost thousands of customers in the early months of the year and the dispute is set to go to the High Court.
The row with Ofcom also has its roots in BSkyB's rivalry with fellow Virgin Media, in which Sir Richard Branson is the largest single investor. Virgin Media, while it was still called NTL prior to its rebranding, had its eyes set on acquiring ITV. When BSkyB paid £940m for a 17.9 per cent holding in ITV, Sir Richard cried foul, persuading Ofcom to investigate whether the move was anti-competitive.
The media regulator has since referred the issue to the then Secretary of State for Trade and Industry, Alistair Darling, who in turn referred it on to the Competition Commission, which has until 7 November to decide whether the move breached its rules. The watchdog will also take into consideration Murdoch's other UK holdings (including The Times, The Sun and the News of the World) when deciding whether Sky's interest in ITV reduces competition in the media marketplace.
How has BSkyB performed this year?
Pretty well, according to city analysts. They predict that the group will announce a hike in sales from £4,148m last year to £4,544m this year, alongside profits of £767m, down from £877m. But this in a very tight TV advertising climate. It also marks a five-year record of continuous profits, following a dire period from 1999 to 2002. It boasts record new customer additions of 349,000 for the three months to 30 June 2007. Net customer additions of 90,000 took its total up to 8,582,000. Sky broadband customers also registered a hefty rise, up by 259,000 to 716,000.
Despite the rift with Virgin Media and the regulator, BSkyB's share price has jumped by 30 per cent since last November, compared with just 7 per cent for the European media sector as a whole. Media commentators are impressed by the sharp rise in performance that Rupert's son James, chief executive since 2003, has squeezed out of the company. He oversaw the introduction of High Definition TV in May 2006 and has a knack of scheduling hit shows, including The Simpsons, 24 and Lost.
What else is the company up to?
It wanted to replace its channels Sky News, Sky Three and Sky Sports News available on Freeview with pay-TV alternatives, but was thwarted by another Ofcom enquiry, which said that with the regulator saying that a period of public consultation was needed. BSkyB was furious, pointing out that neither Setanta or Top-Up TV had been subject to public consultation requirements before breaking into the pay-TV market. It also reminded Ofcom that it had changed an earlier ruling that digital TV channels should be "free-to-air". Ofcom replied that due to the company's strong position in pay-TV, it needed to consider any competition issues arising from the proposal. Some media analysts feel that BSkyB is once again indulging in spoiling tactics, in order to thwart rivals Virgin Media and Setanta. The Irish-owned Setanta will be providing live Premiership football matches this season – ending Sky's monopoly.
What could happen next?
Speculation over the future of BSkyB centres on potential mergers, probably within the Murdoch empire. "The Digger" is thought to be keen to batch up the company with his Asian broadcaster Star TV, and possibly his US TV interests, in order to create a global TV player. Having acquired internet services provider Easynet in 2005, BSkyB is roaring ahead with its "triple-play" plans, combining internet access, telecommunications and satellite TV, in a bid to stay a step ahead of rivals such as Virgin Media and traditional telecoms including BT who are moving into the sector. The Ofcom wrangles and the Competition Commission enquiry are annoying distractions, but even if the worst should happen, and the company be forced to divest its ITV shareholding, BSkyB's current position is strong enough to ride out the loss of face. Murdoch is a tough old bird and won't be flustered by a spot of regulatory bother.
Poor Rupert, just as soon as you think your king of the jungle- another lion shows up! To explain myself in english now, Brad Greenspan, an early investor in MySpace, the social networking site later acquired by News Corp, published an open letter to Dow Jones shareholders on Friday that outlined a plan to boost the company’s stock to $100 per share. The internet entrepreneur has presented a plan to recapitalise and reinvest in Dow Jones in a last-minute effort to head off a $5bn offer for the publisher of the Wall Street Journal from Rupert Murdoch’s News Corp.
Additionally, Guy Hand's grip on EMI seems to be tightening with an announcement that Hands has received more than 26 per cent of acceptances for his £2.4bn offer for EMI, the UK record company. Please see below for details on the extention of hte bid until July 29th. Finally, is private equity at its peak? See below an interesting and short article from Time on the matter.
Hands and Terra Firma, July 23rd, Wall Street Journal.
Terra Firma Capital Partners Ltd., a United Kingdom private-equity concern, said it owns more than a quarter of EMI Group PLC, and it again extended its £2.4 billion ($4.9 billion) bid, after potential suitors Warner Music Group Corp. and former EMI executive Jim Fifield said they had no plan to counterbid. Terra Firma said it had secured 26.2% of shareholder acceptances as of Thursday. The offer has been extended for a fourth and final time, until July 29. In May, EMI, home to artists such as Coldplay, agreed to the offer from Terra Firma. However, the offer has struggled as investors awaited a counterbid from Warner.
A Private-Equity Peak? Time, July 24th edition.
Private-Equity players such as Cerberus Capital Management and Kohlberg Kravis Roberts have scored some of the biggest buyouts ever in recent months, including TXU, First Data Corp. and Chrysler. But are these cash-heavy private-equity (PE) firms racing against time? They need to win and ink future deals before the leveraged-buyout (LBO) window slams shut--a scenario Wall Street experts are betting will happen sooner rather than later.
That's one reason some private-equity players are going public, such as Blackstone Group and Fortress Investment Group. Others are resorting to deal jumping--busting in on another firm's deal with a higher bid, as Filmore Capital Partners did to Formation Capital in the Genesis Healthcare takeout. "There has never been a buyout market that has been this frothy," says Thomas Roberts, partner at Weil, Gotshal & Manges, a leading mergers and acquisitions (M&A) law firm. "[The cycle] looks like it's at the top."
The volume of M&A deals in the U.S. alone surged to $1.49 trillion in 2006--a level not seen since the tech boom in the late 1990s, when annual activity topped the $1.5 trillion mark just prior to the dotcom crash, according to market-research group Dealogic. And it's only halftime. Through early July, M&A volume totaled $1.17 trillion, up from $761.5 billion during the same period a year ago, the first time that M&A volume has topped the $1 trillion mark in the first six months of a year. Private equity accounted for about 35% of total M&A activity so far in 2007, up from 22% last year.
The magnitude of deals-- in volume and size--is unprecedented, said Andrew Nussbaum, a partner at Wachtell, Lipton, Rosen & Katz, which has represented such firms as Apollo Management and Starwood Capital in LBO transactions. "There are many buyers for practically every seller," he said. All this has left private-equity players scrambling to find the next deal while they're still flush.
One sign of the frenzy is deal jumping. In the past, such a tactic was rare in the private-equity club. Historically, going-private transactions were bumped only when a strategic buyer jumped in, such as Whirlpool Corp. against Ripplewood in the Maytag contest, or Building Materials Corp. of America's attempt to bust up the Carlyle Group's buyout of ElkCorp. For PE investors deal jumping was considered a faux pas. "It has long been suspected that there is an unwritten gentleman's agreement among private-equity firms to refrain from jumping each other's deals," said Chris Young, director of M&A research at Institutional Shareholder Services, a highly regarded independent proxy-advisory firm.
PE firms are starting to defy this unspoken rule. A team of PE players joined forces with publicly held Vornado Realty earlier this year to try to derail Blackstone's agreement to buy office giant Equity Office Properties Trust. Although the PE contingent, which included Starwood and Walton Street Capital, eventually dropped out, the ensuing bidding war wound up costing Blackstone significantly more to buy Equity Office in what became the largest leveraged buyout in Street history. Blackstone was forced to boost its bid to $55.50 a share, or $39 billion, from the original $48.50 a share. Another deal jumper: an affiliate of Apollo Management challenged a bid to take EGL private with a counteroffer that has driven up EGL shares more than 50% and added more than $750 million to the original takeover price.
Young predicts deal jumping will become even more common as takeover candidates become scarcer. "Eventually there's going to be fewer and fewer targets," he said. And when that happens, it could get nasty. "Private-equity firms still have a lot of powder to burn, and they're going to have to start being more competitive, and we'll potentially see more deal jumps."
Fueling the competition further are disgruntled mainstream investment funds, which have been egging on PE firms to deal jump. Some have become quite vocal and even threatened to vote their shares against a deal unless a bidder kicked in more money. One such firm is Cohen & Steers Inc., a nonactivist real estate investor, which publicly criticized Blackstone's original takeover offer for Equity Office as being ridiculously low. The firm's comments helped trigger the bidding war that ensued.
Bob Steers, the firm's co-CEO, won't shy from speaking up when he feels a takeout isn't fair. "Oh, absolutely," he said. "Our fiduciary obligation is to maximize the returns and the valuation for our investors." Carl Icahn more recently suffered a similar predicament when shareholders rebelled against his offer for auto-parts maker Lear Corp., forcing him to cough up more cash. And several PE financings have flopped because investors balked at the lenient loan terms.
How much longer can the boom last? "I do think the market has gotten away from itself," said Roberts. "It's inevitable it will slow down, and there will be some reversals." Banks and law firms have been quietly beefing up their distressed-trading desks over the past six months. The end is near, but it could be profitable.
I don't like to repeat rumours or gossip, and dislike even more being a point of discussion. Therefore, I apologise in advance for this post which focuses on the rumours doing the rounds. However, lets term this as part of my job of ensuring your up to date on all things to do with media, and I can stomach writing this post.
I was saddened to learn that Red Herring may be facing difficulties. I have no love lost for Alex Vieux who is simply not my cup of tea. But, do have a great deal of time for his editorial management team, especially Joel Dreyfuss, his editor-and-chief and Farley Duvall, who heads up operations in Switzerland. Both, very hardworkers and really, really nice guys. I do hope for the hard working management and editorial teams, that the rumours doing the treadmill are blown out of proportion as Red Herring does serve an important function for the online digital media community. In any case, I wish those I know and respect at the organisation my wishful best thoughts during a potentially difficult period.
Additionally, is something afoot between private equity and hedge funds? See case in point - Gemstar-TV Guide article below.
Poor Rupert, his efforts to buy Dow Jones seem to be moving in the right direction but as ever, lots of screaming & yelling taking place about selling the family treasure.
I am sure Rupert is sitting there and wondering, why people get in the way of his efforts at world media domination? Hmm...fair point, one should remember the military triumphs of Alexander the Great and Napolean to truly understand business men such as Rupert. Isn't it the case, that since man can no longer conquer new frontiers on a physical plane - he must do so on the world of business - as the territorial ground of business and politics, is pretty much all that is left to play with these days? Aside from the obvious devices.
Finally, its never easy to be the daughter or son of a Napolean or Alexander the Great. Refer to point in case of Sumner Redstone who at 84 is very busy trying to sideline his daughter from taking the reigns of his media empire.
My advice to Shari - go build your own. In the short term it is harder, but in the long term - they (including the parent figure) respect you more. And even if they don't, you become your own person during the process & that's worth its weight in gold.
In honour of an exceptional human being - Nelson Mandela who celebrated his 89th birthday today.
Archbishop Desmond Tutu, to Nelson Mandela : "You make us feel great about being human." - how eloquent and probably the most profound compliment that any human being could ever receive.
And as for Mr. Mandela - his thoughts on turning 89:
The former South African president said he hoped The Elders -- including ex-US president Jimmy Carter and former UN chief Kofi Annan -- would "work to support courage where there is fear, foster agreement where there is conflict and inspire hope where there is despair".
"They don't have careers to build, elections to win and constituencies to please. I hope that they succeed in bringing light to some of the darkness that affects our world," Mr Mandela said
I recognise this is far and away from the world of venture capital, private equity and all things to do with digital media. However, it is not often that a giant walks amongst mere men and well, Mr. Mandela is as Statesman like, and a true leader as the world has ever seen. And of course, I am completely and utterly biased!
Second Life is in the papers, quite a lot. First, in the online virtual universe of Second Life, one avatar has sued another for stealing his intellectual property, the design for a virtual bed. Specifically, Stroker Serpentine, real world name Kevin Alderman, claims that another avatar has stolen his bed design, and is selling counterfeit copies. Using a loophole in the Second Life law, the alleged thief, Volkov Catteneo, and others like him, have been able to escape justice, for now. A virtual lawsuit, I believe that is a first?
On a related note, The Sunday Times and PA Consulting are hosting an online seminar “Getting real about business in Second Life” on July 24 at 2pm UK time. See below for details, on how to virtually attend.
Finally, is marketing on second life, all its cracked up to be? There seems to be some mixed views and sentiments on the same, story follows below.
Signing off - Shamsa
