SPT Networks Business Development Overview. January 18, 2013 [DRAFT FOR DISCUSSION PURPOSES]

Transcription

1 SPT Networks Business Development Overview January 18, 2013 [DRAFT FOR DISCUSSION PURPOSES]

2 Deal Summary ($ in MM) # Deal of Opportunity of Potential Transaction Asia Pacific / India Est. Valuation (1) FY14 Cash Outlay 1 Maa TV Acquisition of Maa TV gives SPE an instant foothold in Southern India and provides a platform to launch local language versions of MSM channels in the region Acquire 53% stake in Maa TV for $113M $205 $ Dori Media Group s Indonesian Channels Acquisition of the Indonesian channels would significantly increase SPT s presence in Indonesia Acquire 50% stake in DMG s Indonesian channels for $ $15.5M $27 - $31 $ $ ADC / So-net ADC would be an attractive channel to add to the portfolio in Japan: 1) increase distribution of ADC, 2) complement SET ONE and 3) strengthen ties with Korean programming partners Transfer 100% of ADC from So-net Entertainment $2 - $4 $2 - $4 4 SET Australia Launch first fully owned channel in Australia Launch channel in Late Summer/ Fall 2013 TBD $9 EMEA 5 True Movies and True Entertainment Acquisition of the True Movies/Entertainment assets makes SPT the #2 movie provider on the Sky platform, complements Movies4Men and provides cross-promotion opportunities with SMC/SET and helps Dolphin s ad sales business Acquire 100% of True Movies and True Entertainment from CSC with 100% of SPT s stake in ITN valued at $10M and $20M in cash $30 $20 6 Vidzone Acquisition allows SPT to establish a European beachhead for Digital Networks and Crackle and gain distribution scale and leverage with platform partners Acquire 51% of Vidzone for $5.6M (SPT also assumes $3M in net debt; a cash outflow) $14 $8.6 7 GNAM / Space Power Investment would allow SPT to establish an immediate market presence in the Middle East Invest $2.0M for 25% stake in Space Power with the option to invest an additional $2.8M for 26% of equity $6 - $8 $2.0 8 e2 (SET Turkey) Channel Acquisition would allow SPT to establish an immediate market presence in Turkey and provides SPT with a platform to launch/acquire additional advertiser supported and pay cable/satellite channels over the next three years Acquire 100% of e2 channel from Dogus Media Group $7.5 $7.5 (2) 9 Norway Channel Launch first fully owned channel similar to SMC in Scandinavia Launch channel in 2013 TBD $5 10 AXN Central Europe Extend AXN channel brand throughout Central Europe Launch channel in 2013 TBD $5 United States 11 FEARnet Buy-up Expand our US networks footprint and leverage SMC/Cine channel infrastructure and expertise to obtain cost savings and synergies for FEARnet Acquire 65.5% of FEARnet from Comcast/Lionsgate for $23.7M; the share SPT doesn t already own $36 $ Game Circus Acquisition allows GSN to accelerate growth in the crucial mobile sector with successful products and a meaningful sized audience GSN to acquire 100% stake in Game Circus for $15M upfront with up to a $20M earn-out component $15 - $35 $15 (2) Acquisition of TV Asia will add to MSM s already strong US presence in the (1) 13 Estimated TV Asiavaluation assumes South the total Asian EV TV value market of the (SET asset, Asia, not SET the share Max, Sony only owned Sub and by Sony SPT. AATH) Acquire 100% stake in TV Asia $26 $26 2 (2) Game Circus has a $15M cash and outlay provide in FY13. an opportunity e2/set Turkey to exploit has MSM s a $1M content cash outlay libraryin FY13 and $6.5M in FY14.

3 Other Discussion Topics AMC GSN Merger GSN (Digital) Sports Rights (India) MTG JVs Crown Media/Hallmark Outside financing 3

4 Maa TV Overview India SPT is in the process of acquiring 53% of Maa TV from Nimmagadda Prasad, who currently owns 64% of the company, and other minority and employee shareholders Total 53% acquisition is expected to occur in two transactions, 51% at close (in FYE14) for $98M plus assumption of $9M in debt, and $5.4M in FYE15 for an additional 2% stake Maa TV was launched in 2002 and has a well-distributed bouquet of 4 channels in Southern India Acquisition of Maa TV will give SPE an instant, strong presence in Southern India, provide a platform to launch local language versions of the other MSM channels and give SPE a foothold in Southern India, which is faster growing than the Hindi-speaking region Transaction is pending outcome of proceedings between the Indian Tax Authority and Mr. Prasad, tax clearance for shares SPE will purchase, and Indian regulatory board approvals $205MM enterprise value for 100% Third party valuation firm (D&T) determined this purchase price is at the low end of the value that SPE or another strategic buyer would expect to derive from acquisition of Maa TV Total cash layout of $113M for 53% stake in Maa TV: $107.4M at close of initial transaction ($98.4MM for 51% of shares plus assumption of $9M in debt) $5.4M in FYE15 to acquire additional 2% stake Post Close ($ in MM) FYE 3/31 Maa TV Acquire majority stake in Maa TV 53% SPT, 47% Mr. Prasad / other minority shareholders FY13E FY14E FY15E FY16E Revenue $39.2 $47.5 $57.8 $71.0 EBIT $9.3 $13.7 $19.3 $27.8 SPE EBIT NA ($2.2M) $5.9M $16.4M Projected NPV of $23M, IRR of 17% and payback of 11 years US$ values based on exchange rate of 55INR:US$ 4

5 Dori Media Group Indonesian Channels Overview Indonesia SPT is exploring options to increase its presence in Indonesia Indonesia is an attractive market with attractive demographics and strong economic growth There are limited opportunities to acquire channels in Indonesia SPT has been approached with an opportunity to acquire a stake in Dori Media Group s (DMG) Indonesian channels business DMG currently operates three channels in Indonesia with an exclusive deal with the leading pay-tv platform MNC Skyvision Televiva Telenovela channel with DMG owning 100% GINX - Video game channel with DMG owning 75% and 25% owned by UK based Ginx TV Baby Baby and toddler channel with DMG owning 37.5% with the remainder owned by Fox controlled Baby TV Valuation Potential Basis expansion opportunities include Poland, Africa and within Indonesia DMG Indonesian Channels (1) SPT is currently completing its valuation of Acquire a 50% stake in DMG s Indonesian channel DMG s Indonesian channels. Using the business (proposed) Company s business plan, SPT has calculated a 50% SPT (proposed) preliminary EV of $27M - $31M DMG has provided its initial estimated EV of $33M - $49M SPT is assuming it would acquire a 50% stake in this business but discussions with DMG are at a preliminary stage ($ in MM) CY13E CY14E CY15E CY16E Revenue $6.5 $7.3 $8.3 $9.6 EBIT $2.4 $2.9 $3.5 $4.4 Net Income $2.1 $2.6 $3.2 $4.0 (1) Based on DMG management estimates. 5

6 Asia Dramatic Channel (ADC) / So-net Overview Japan SPT has an opportunity to transfer So-net s Japan based Asia Dramatic Channel (ADC) into SPT s Japan portfolio ADC is a basic tier channel with programming from Korea, Taiwan and China Launched in July 2003 and currently has 2M subscribers SPT remains interested in transferring So-net s media assets and believes ADC would be an attractive channel to add to the portfolio in Japan SPT will leverage its infrastructure and relationships for its existing three Japan channels to increase distribution of ADC Complements our successful Asian-Korean drama channel, SET ONE Strengthens relationships with Korean programming partners So-net has indicated they may be willing to transfer ADC at its book value of $2 - $4M Using SPT s business plan for expanding distribution, the NPV would be $14.3M and IRR of 58% (1) ADC Transfer 100% of ADC from So-net Entertainment 100% SPT ($ in MM) FY14E FY15E FY16E FY17E Revenue $8.6 $10.1 $10.4 $11.2 EBIT $0.0 $0.5 $2.0 $2.6 Net Income $0.0 $0.3 $1.2 $1.5 (1) Based on perpetuity growth rate of 1% and 10.5% discount rate. 6

7 SET Australia Channel Launch Overview Australia SPT is evaluating an opportunity to launch an SET channel in Australia on Foxtel s satellite and cable platforms The business plan has the channel receiving dual revenue streams from ad sales and affiliate fees (sub fees are still being negotiated with Foxtel) The programming is expected to consist of a variety of general entertainment programs (i.e., dramas, comedies, soaps, talk shows and library shows), however, a finalized programming grid is still being worked out Outlet for 1st run SPT series including Mob Doctor, The Client List, David Shore series, Michael J. Fox project, etc. The channel is anticipated to launch in Late Summer/Fall 2013 The final business plan is still to be determined SET Australia (1) Launch SET Australia in Late Summer/Fall % SPT ($ in MM) FY14E FY15E FY16E FY17E Revenue TBD TBD TBD TBD EBIT TBD TBD TBD TBD Net Income TBD TBD TBD TBD (1) Exact business plan still to be determined. 7

8 True Movies and True Entertainment Overview UK SPT believes that an acquisition of the True Movies and Entertainment business is very attractive and complements its existing UK networks business Sony becomes the #2 movie provider on the Sky platform Complements Movies4Men s audience for ad sales and provides cross-promotion opportunities with SMC/SET Supports recently acquired Dolphin with their ad sales efforts in the region VSS have indicated they wish to dispose of 100% of the CSC Media Group business which includes movies, entertainment, music and kids properties SPT submitted a non-binding expression of interest to acquire the assets of True Movies and True Entertainment from CSC Media Group, valuing the assets at an enterprise value of $30M (cash/debt free basis) Discussions are ongoing SPT s original EOI letter assumed the company had an EV of $30M True Movies / True Entertainment (1) Acquire 100% of True Movies and True Entertainment from CSC with 100% of SPT s stake in ITN valued at $10M and $20M in cash The purchase price would be paid as follows: 100% interest in SPT s stake in ITN LLC valued at $10M and $20M cash at close SPT submitted the above bid, but further discussions with CSC Media Group have stalled 100% SPT ($ in MM) FY14E FY15E FY16E FY17E Revenue EBIT post-ppa $11.8 $12.5 $12.9 $13.4 $0.4 $1.6 $2.8 $3.9 FCF $3.0 $3.2 $3.3 $3.5 (1) Assumes Projections per SPE and assume that True Movies channels are integrated with SPE s existing UK channels. Valuation also assumes that Virgin maintains carriage of these channels following a change in control 8

9 Vidzone Overview UK Acquisition allows SPT to establish a European beachhead for Digital Networks and Crackle, gain distribution scale and leverage with platform partners (e.g., Samsung), make use of music s role in linear TV / youth programming (e.g., SPIN), and gain advertising sales scale and leverage in U.S. and markets where SPT has direct sales capabilities (e.g., LatAm) SPT Digital Networks has the opportunity to acquire a 100% stake in Vidzone, a premier music video digital network on PS3 in 18 European countries, Australia, and New Zealand Service launched in 2009 and has approximately 500K monthly unique visitors and 30M average monthly streams Vidzone plans to expand its footprint to PS3 U.S. (Feb. 2013), Connected TVs in Europe (Oct. 2013), and Nintendo Wii Europe (Jan. 2014) (1) SPT to purchase 51% equity for $5.6M at transaction close (est. Apr. 2013) based on $11M equity value and $14M enterprise value; $3M of Vidzone net debt obligations to remain post-transaction Opportunity to purchase the remaining 49% for $8.5M (SPT case) to $12.3M (maximum cap) via a capped Put/Call three years from transaction close (Apr. 2016) Estimated purchase price of $14.2M to $17.9M for 100% ownership Vidzone Acquire 100% stake in Vidzone 100% SPT (anticipated); 70% Vidzone Mgmt / 30% Private (current) ($ in MM) FY14E FY15E FY16E FY17E Revenue $13.7 $15.3 $18.1 $19.8 EBIT ($1.3) $1.3 $2.0 $3.1 Cash Flow ($1.5) $2.0 $1.8 $2.5 Based on SPT case, investment is forecasted to generate an NPV of ($0.9M) and IRR of 14.8% (1) Deal based terms currently on a being $10.5M negotiated; DWM. acquisition price and returns based on SPT s current position Note: Sony Computer Entertainment Europe (SCEE) provided Vidzone with a 3MM loan to fund working capital for the option to buy 100% of the equity. SCEE did not exercise the option which expired March 2012, however retains the right for repayment of its debt. 9

10 GNAM Overview Middle East SPT Networks is exploring options to establish a presence in the Middle East SPT had earlier been approached by Global New Age Media (GNAM) to acquire a 51% interest in their Space Power (SP) Channel for $6 $8M, a Free-to-Air (FTA) channel broadcast in the Middle East in order to form a JV which would be re-branded to target the youth demographic (15-29) with high-quality targeted programming GNAM launched Space Power (SP) to capture the youth audience as they transition past Space Toons TV, however, SP has largely been unsuccessful Targets teenagers and adolescents from ages 13-22, showing sports, music, movies, and television sitcoms Features anime/manga Series content Based in Dubai (formerly based in Damascus, Syria) SPT has since offered to invest $2.0M for 25% interest in the Space Power (SP) Channel at a pre-money EV of $6M with a call option to invest an additional $2.8M for 26% of equity in Space Power at a pre-money EV of $8M NOTE: SPT s valuation was based on (i) comparable revenue multiples against historical revenue figures from SP since the company has been operating at a loss since launch and (ii) direct sales approach based on EVs of small FTA channels GNAM has since provided a counter offer which asks for $7M for 51% equity (45% increase to our offer of $4.8M for 51% equity). SPT is currently evaluating the counter-proposal Pre-money EV of $6M per SPT offer and $9.8M per GNAM counter-offer for 25% equity; additional 26% equity to be acquired at a premoney EV of $8M per SPT offer and $10.7M per GNAM counter-offer Based on SPT s original offer, the investment would have an NPV of $3.8M and an IRR of 25.2%. Based on the GNAM counter-proposal the investment would have an NPV of $1.2M and an (1) Based on management projections of a potential SPT/GNAM JV. GNAM (1) Invest $2.0M to acquire 25% equity of SP with the option to invest an additional $2.8M for 26% equity 25-51% SPT (anticipated) / 100% GNAM (current) ($ in MM) CY14E CY15E CY16E CY17E Revenue $4.0 $9.5 $12.3 $13.6 EBIT ($2.4) ($0.1) $1.4 $ FCF ($2.5) ($0.3) $1.1 $2.2

11 E2 (SET Turkey) Channel Overview Turkey SPT is seeking to acquire 100% of e2 channel from Dogus Media Group and establish an immediate market presence in Turkey Dogus-owned TV channels comprise 18% of the Turkish TV advertising market and include NTV, CNBC-e, NTV Sport, KRAL TV, NVA TV, HD-en as well as recently acquired Star TV Dogus is seeking to divest e2 as it shifts its focus to Turkish content following its acquisition of Star TV, a general entertainment network and Turkey s first private TV channel, for $327M e2 channel is an advertiser supported cable/satellite channel launched as a sister channel to CNBC-e in 2007 e2 has strong positions on each of the major digital platforms (Digiturk, Turksat, D-Smart) reaching 10M homes (56% of total TV households) and airs high-quality first-run western programming Turkey is a high-growth, strategic market to SPT and difficult to enter through a stand-alone launch Acquisition will allow SPT to leverage Dogus relationships and infrastructure for 16 months post-close which will enable SPT to successfully operate a stand-alone channel beginning in FY15 Acquisition provides SPT with a platform to launch/acquire additional advertiser supported and pay cable/satellite channels over the next three years E2 (SET Turkey) TV Total purchase price of $7.5M, to be paid $1.0M at close and $6.5M at April 15, 2013 Total investment of $9.6M including operational funding under Base Case including SPE license fees FY13 payment and operating investment of $(1.3M) vs. FY13 Networks cash flow forecast of $(5.5M) including SPE license fees; FY13 EBIT of $(1.2M) vs. FY13 Networks EBIT forecast of $(1.7M) Acquire 100% of e2 channel from Dogus Media Group 100% SPT (post-close) ($ in MM) FY14E FY15E FY16E FY17E Net Ad Revenue EBIT to SONY after PPA $4.5M $5.8M $6.5M $7.2M ($2.6M) ($1.6M) ($1.2M) ($0.7M) 11

12 Norway Channel / AXN Central Europe Overview Norway & CE Norway Channel SPT is evaluating an opportunity to launch a version of Sony Movie Channel in Norway and expand distribution throughout Scandinavia Currently in discussions with Canal Digital and Viasat for regional carriage Scandinavia is a multifaceted region with high rates of GDP, a growing TV viewership and high broadband penetration The channel is anticipated to launch in sometime in 2013 AXN Central Europe SPT is evaluating an opportunity to launch AXN throughout Central Europe through an exclusive deal with Polsat The channel is anticipated to launch in sometime in

13 FEARnet Buy-up Overview US SPT is evaluating a plan to buy out Comcast and Lionsgate s share of FEARnet for $23.7M SPT examined bringing FEARnet s operations in-house under the SMC/Cine umbrella post-acquisition The SMC/Cine operational team examined FEARnet s current operating plan and made adjustments assuming the operations were brought in-house There are significant synergies and cost savings associated with integrating operations and eliminating redundancies in the range of $25M cumulatively over the next 5 years If SPT were to acquire Lionsgate and Comcast s stake in FEARnet for $23.7M and bring their operations in house, the investment returns would be greatly enhanced; plus, SPT would realize a $8-9M step-up gain Based on FEARnet s current budget, the investment would net an NPV of $5.7M and an IRR of 22% (1) If operations were brought in-house postacquisition, the investment would net an NPV of $46.2M and an IRR of 63% (1) on a best-case scenario, as a result of cost savings and synergies FEARnet (2) Acquire 65.5% of FEARnet from Comcast/Lionsgate for $23.7M (the share SPT doesn t already own) 100% SPT (anticipated) / 34.5% SPT, 34.5% Lionsgate, 31% Comcast (current) ($ in MM) CY13E CY14E CY15E CY16E Revenue EBIT post-ppa $25.5 $30.0 $32.9 $34.9 ($1.4) $4.4 $7.3 $8.6 Assuming a low case where Dish were not picked up, the investment would net an NPV of $25.2M and an IRR of 44% (1) (1) Based on perpetuity growth rate of 3% and 12% discount rate. The 12% discount rate is on the low end of the WACC range of 12%-16% for this industry. (2) Based on FEARnet management financials inclusive of the cost/synergies from bringing operations in-house under a best-case scenario. 13

14 Game Circus Overview US Acquisition allows GSN to accelerate growth in the crucial mobile sector with successful products and a meaningful sized audience, drive mobile ad revenue growth, capture upside against Game Circus weak virtual goods execution, cross-pollinate GSN gaming content, and cross-promote GSN/Game Circus users GSN has the opportunity to acquire a 100% stake in Game Circus, a developer and publisher of arcade style games for mobile platforms Founded in 2010, the company publishes standalone mobile apps on the ios and Android platforms with a total portfolio of 40 game titles, including principal properties Coin Dozer and Prize Claw Game Circus apps have 3 million daily active users and their games have been downloaded in total over 80 million times GSN to purchase 100% ownership in Game Circus for $15M upfront and an earn-out of up to $20M to be paid one year from close; projected earn-out payment of $9.9M in GSN s Base Case scenario GSN projects investment to generate an NPV of $29.3M SPT in the process of working with a 3rd party advisor to validate valuation and investment returns Game Circus GSN to acquire 100% stake in Game Circus 100% GSN (anticipated); 100% Game Circus Mgmt (current) ($ in MM) CY12E CY13E CY14E Revenue $16.0 $21.5 $28.6 EBITDA $6.0 $7.5 $10.5 Transaction projected to close March

15 TV Asia Overview US Acquisition of TV Asia will add to MSM s already strong US presence in the South Asian TV market (SET Asia, SET Max, Sony Sub and Sony AATH) and provide an opportunity to exploit MSM s content library SPT is evaluating an opportunity to acquire a 100% stake in TV Asia, the first 24x7 South Asian channel in the US TV Asia was founded in 1993 and is well distributed on satellite and various cable/tel-co networks Programming consists of locally produced shows including news, community round-up, entertainment, cultural and educational programs and film/tv programming from vendors, channels and production companies in India Seller is looking to divest because the owner, Mr. Shah, is supposedly highly leveraged. NOTE: TV Asia is currently paying interest expense on $8.7M in debt, which would be extinguished Estimated purchase price of $25M-$30M to acquire 100% of TV Asia. The sellers are currently contemplating a deal with no debt or cash assuming both parties elect to structure the deal under Section 338 h 10 (1) Based on $26M purchase price (6.3x 2012 EBITDA of $4.1M), projected NPV of $11.6M, IRR of 29% with cash-flow breakeven in FY2015. NPV of $20.9M and IRR of 41% when including incremental license fees paid to SPE (2) TV Asia (3) Acquire 100% stake in TV Asia 100% SPT (anticipated), 100% Mr. Shah (current) ($ in MM) FY14E FY15E FY16E FY17E Revenue $10.1 $11.2 $12.3 $13.6 EBIT $0.6 $2.0 $2.4 $3.4 Net Income $0.3 $1.2 $1.4 $2.0 (1) Exact deal structure still to be determined. Need further clarification from outside advisors/investors. (2) Based on SPT Business plan case. NOTE: NPV and IRR vary greatly with purchase price and discount rate estimates. (3) Based on SPT Business plan case projections. Assumes SPT adjustments to Management Case financials 15