General Electric Co's NBC television unit agreed to buy Cablevision Systems Corp's Bravo cable network for US$1.25 billion, giving the most profitable US broadcaster its first entertainment cable channel.
Proceeds will be divided between Cablevision and Metro-Goldwyn-Mayer Inc, which own 80 percent and 20 percent of Bravo, the companies said in a statement. Analysts said the sale will help Cablevision, facing a cash shortfall, to reduce debt.
NBC will increase Bravo's profit by about 30 percent next year by lowering costs and boosting ad sales, NBC Chief Executive Robert Wright said. Bravo, known for running movies and shows such as "Inside the Actors Studio," reaches 68 million homes and gives NBC, whose top shows include "Friends" and "ER," another network for entertainment.
"We spend a fortune licensing and producing entertainment programming," Wright said. "It will be great to have another outlet."
Wright said Bravo probably won't change much of its programming for about three years because of current contracts. In the meantime, NBC "can better promote it, better enhance it and make it more profitable."
Under the transaction, Cablevision will get about 52.3 million of its shares, currently held by NBC, and about US$465 million in General Electric stock, based on Friday's close, or a total of US$1 billion in stock. MGM will be paid US$250 million in cash.
Cablevision can sell the stock immediately after the transaction is completed, NBC said.
Cablevision is under pressure to sell assets after borrowing billions to upgrade cable systems. In August, the Bethpage, New York-based company said it would try to close a cash shortfall of as much as US$900 million next year by selling the Clearview Cinemas movie-theater chain and closi
The Bravo sale will boost Cablevision's profit, though the price is lower than recent purchases of cable networks, said Credit Lyonnais Securities analyst Richard Read, who has rates Cablevision a "buy." NBC said it expects to complete the purchase this year.
NBC's advertising team can help boost Bravo's sales in part because the group is experienced in selling affluent audiences, or people who make US$75,000 or more a year, investors said.
Advertisers value such viewers because they are considered better able to afford new products and services than lower-income groups, media buyers have said.
Bravo ranks second for TV networks among affluent viewers, behind NBC's CNBC cable-news channel, Wright said. NBC network ranks third, Wright said.
NBC also operates the MSNBC cable-news network, jointly owned with Microsoft Corp. NBC in April bought Telemundo, the second-largest US Spanish-language network, for US$2.7 billion.
Wright said there might be job cuts at Bravo. He expects the channel to generate US$70 million in operating income next year on revenue of US$160 million.
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