One of the last remaining independent cable networks is no more, as NBC Universal yesterday sealed a deal to take over female-focused Oxygen Media for $925 million.
Oxygen – founded in 2000 by CEO Geraldine Laybourne and television bigwigs Oprah Winfrey, Marcy Carsey, Tom Werner, and Caryn Mandabach – brings NBCU’s cable network ownership to six, joining USA Network, Bravo, Sci-Fi, CNBC and MSNBC.
With its broadcast network still clawing its way out of the ratings basement, NBCU boss Jeff Zucker has been emphasizing the strength of its suite of cable networks to analysts and investors and in media interviews. Not counting Oxygen, cable holdings together account for 50 percent of the company’s profits.
“Cable is the real strength of NBC Universal and a real growth area for us,” Zucker said on a conference call yesterday.
Zucker said that Oxygen, whose programming includes “Campus Ladies” and “Tori & Dean: Inn Love,” fits perfectly with NBCU’s other female-skewing assets, including Bravo, iVillage and “Today.”
NBCU will pay $925 million, but when accounting for certain financial assets of Oxygen, the net purchase price is $875 million. It’s significantly less than the “BET money” Oxygen was rumored to be looking for, a reference to the $3 billion Viacom paid for BET in 2000.
The deal, expected to close next month, equates to about $12 for each of Oxygen’s 74 million subscribers, cheaper than the $22 per subscriber NBCU paid when it bought Bravo in 2002. Using Oxygen’s estimated $80 million a year in cash flow equates to a multiple of about 11 times, which is on the low end of recent cable transactions.
NBCU plans to fund the deal with the proceeds from the sale of two television stations, one in Los Angeles and the other in Puerto Rico.
The deal should give Oxygen, which trails Lifetime but is ahead of WE: Women’s Entertainment, the promotional heft it needs.
“Cross-promotion was our biggest issue,” said Laybourne, who will be replaced as Oxygen’s CEO at the end of the year.
For Oxygen, the deal was as much about cashing out its investors – all of whom will exit their investment – as it was about gaining a promotional platform.
According to a source familiar with the situation, Microsoft co-founder Paul Allen’s Vulcan Capital recently exercised an exit option on Oxygen that eventually led to its sale. This source added that Allen, who has pumped $300 million into Oxygen since 1999, will cash out to the tune of $375 million for a $75 million return-on-investment.