Discovery, Liberty secure All3Media takeover

only_way_is_essex_1Discovery Communications and Liberty Global have confirmed the £550 million (US$930 million) acquisition of the UK’s largest production group, All3Media.

Yesterday, it emerged the pair had snuck in to tie up a deal for the producer, which comprises 26 creative divisions, 19 production units and international distribution wing All3Media International, and scored revenues of around £505 million for the fiscal year to August 2013.

FremantleMedia had looked set to acquire the firm earlier this year, but TBI understands significant regulatory issues came to light during a due diligence period and a deal was made impossible.

The deal with exiting parent Permira and All3 management has an enterprise value of £550 million and represents a multiple of 8.5 times All3’s EBITDA. It will be financed through a combination of equity and new non-recourse credit facilities raised at All3. Discovery and Liberty will also both contribute around £90 million each in cash.

David ZaslavDiscovery and Liberty will form a 50-50 joint venture that will house All3, which counts Midsomer Murders, Gogglebox, The Only Way is Essex, Skins and Undercover Boss among its programming assets. All3 prodcos include Lime Pictures, Objective Productions, Lion Television, Bentley Productions, Company Pictures, MME Moviement, All3Media America and Studio Lambert.

The deal brings to an end a long search for a new parent for All3. Permira had first attempted to sell the company for £750 million in 2011, but found offers on the table nowhere near that amount. However, the £550 million represents a tidy profit on the £320 million it paid to buy All3 in 2006.

“This new partnership will enable All3Media to expand further through multiple avenues of growth around the world, including in the U.S. market, which has been a driver for our business for the past several years,” said All3’s chairman and co-founder Steve Morrison (below right), who stepped down as CEO after the initial failed sale.

“I wish to thank Permira, with whom All3Media has doubled the size of its business, and congratulate the company’s fantastic management and staff for playing their part in All3Media’s continuing success.”

Steve-Morrison1All3’s current CEO, Farah Ramzan Golant, said the deal was “a proud recognition of the achievements of our stellar creative companies in making ground breaking, popular, high-quality content”.

Discovery, meanwhile, will count the deal as a major boon after coming close to acquiring UK broadcaster Channel 5 earlier this month.

“For Discovery Communications, the world’s number one pay TV programmer, it has always been about creating compelling content for our global audiences, and this partnership is yet another way for us to work with the best storytellers in the business,” said David Zaslav (above left), president and CEO of Discovery Communications.

“This venture allows us to work closely with Liberty Global, a valued partner and the largest international cable company, in managing a financially strong, innovative and creatively prolific production company.”

Cableco Liberty, meanwhile, had appeared to be pulling out of the content game after selling Chellomedia and its associated channels to AMC Networks for US$1 billion, but this has proven not to be the case.

Mike FriesLiberty CEO Mike Fries (left) said that “in view of the increased competition for great content and non-linear rights, All3Media represents a smart strategic investment for us over the long-term”, adding: “Just as importantly, we expect All3Media to provide very attractive financial returns given its growth potential and our proposed financing structure. This is just the first step in our mission to own and develop content assets that support our core distribution platform across Europe.”

The deal is expected to close in the third quarter of this year subject to regulatory clearances.

J.P. Morgan was financial adviser to Discovery Communications and Liberty Global and Freshfields Bruckhaus Deringer LLP served as legal adviser. DLA Piper LLP also served as legal adviser to Discovery Communications. Centerview Partners acted as financial adviser to All3Media and Clifford Chance served as legal adviser. Shearman & Sterling served as legal adviser to the All3 management team.