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Kroenke Bags Outdoor Channel — Now What?

BILLIONAIRE’S FIRM WINS BIDDING, BUT KEEPS QUIET ON PLANS FOR NETWORK 3/17/2013 8:00 PM Eastern

Now that Kroenke Sports & Entertainment has emerged the winner in the brief battle for Outdoor Channel, what does the sports and entertainment company have in store for the hunting, fishing and outdoor lifestyle network?

Investors will have to wait a little longer for an answer.

The typically tight-lipped KSE declined to comment on the deal, which is expected to close in the second quarter, and its Securities and Exchange Commission filings have said little about its plans for the channel.

KSE, which owns several professional sports teams, Denver-area regional sports network Altitude Sports and fishing channel World Fishing Network, will likely seek synergies with Outdoor, but for the moment, its plans remain locked within the minds of the parties involved.

“Our board of directors has unanimously determined that the proposed all-cash merger with KSE offers superior value for our stockholders,” Outdoor Channel CEO Tom Hornish said in a statement announcing the deal.

Noble Financial Capital Markets media analyst Michael Kupinski said the Kroenke deal appears to be a strong one, and KSE’s vast resources can only help the network. KSE is headed by Stan Kroenke, the 92nd-richest man in the U.S., according to Forbes, with an estimated net worth of $5 billion. KSE, which owns the NBA’s Denver Nuggets, the NHL’s Colorado Avalanche and the NFL’s St. Louis Rams, has sports properties valued at about $4 billion.

“It [Outdoor] definitely needs to make some investment into its programming,” Kupinski said. “It’s great to have somebody with deep pockets that can make some investments there.”

The market is definitely there. Roughly 82 million Americans spend $108 billion annually on hunting, fishing, bird watching and other wildlife-related activities, according to the U.S. Fish and Wildlife Service.

“I think that if someone really invested in this business, I honestly think it’s a great little niche,” Kupinski said.

The agreement ended what was a whirlwind past few weeks for Outdoor, which in November agreed to merge with its chief rival in the hunting and fishing space, InterMedia Partners, parent of the Sportsman Channel. InterMedia proposed a $208 million deal that would have given Outdoor shareholders the option of exchanging part of their holdings for cash ($8 per share) and an interest in a new public company (InterMedia Outdoors Holdings).

Two weeks from the final approval of that deal, KSE made its unsolicited competing offer, and on March 8, Outdoor Channel’s board determined the KSE deal was superior.

InterMedia, which received a $6.5 million breakup fee, said it had sweetened its original offer. “The board still ultimately wanted certainty, and we weren’t going to make what was already a better deal that much better,” Inter- Media Partners managing partner Peter Kern said. “It just wasn’t worth it to us.”

The KSE deal is expected to close by the end of the second quarter, and KSE will then begin the task of integrating the Outdoor Channel into its small stable of cable properties. Outdoor will have the biggest reach of KSE’s cable networks — at 39.1 million homes, it tops Altitude’s 3.1 million households and WFN’s more than 20 million homes. Whether KSE will put programming from either of its existing networks on Outdoor, or vice versa, remains to be seen.

As for the Sportsman Channel, Kern said it will focus on continuing to grow the outdoor space.

“We still want to ultimately build the category bigger,” he said. “We think it’s a much bigger business than either of us has created.”

TAKEAWAY

Now that KSE has prevailed over InterMedia in the bidding for Outdoor Channel, investors must wait to see what synergies the sports firm will find with its newest property.

September