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NICC 'Put’ Could Add Sparkle To Crown

8/31/2007 8:00 PM Eastern

Oppenheimer & Co. media analyst Tom Eagan maintained his “buy” rating and $9.25 per share price target on Crown Media Holdings, parent of the Hallmark Channel, adding that a potential “put” right from one of the company’s largest shareholders could eventually lead to higher ratings.

The National Interfaith Cable Coalition has had the right to put its 4.4 million shares of Crown Media (about 4% of its outstanding stock) since Aug. 29 (it expires on Nov. 1), which has put some pressure on shares. The stock has dipped 4.5% (32 cents each) since Aug. 17.

The NICC put right only goes into effect if Crown decides not to renew its programming agreement with the coalition. And Eagan believes Crown is willing to risk absorbing the cost of the put right (about $28.8 million) in order to get out of the NICC programming deal.

In a research report, Eagan wrote that “concluding this somewhat costly deal will enable Crown to reallocate more than $24 million in programming costs and likely garner higher ratings.”

The NICC provides faith-based programming to the Hallmark Channel, which generally attract lower ratings.

Eagan added that he believes the NICC will put the shares directly to Crown’s shareholders — which he called a “middle case scenario.” His best-case scenario would be for the NICC to sell the stock to a strategic investor like Liberty Media or NBC Universal. The worst-case would be a put directly to Crown, but Eagan wrote that the company has likely put aside the cash to make that purchase.


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