Conan O’Brien could turn out to be the barbarian of American cable. In one sense, the late-night talk-show funny-man heralds a bold new era for niche channels by commanding ad rates at his new home commensurate with those at his bigger broadcast brethren. In another more important way, however, O’Brien represents TV’s widening divide and a milepost en route to the culling of an overpopulated boob tube.
O’Brien wasn’t supposed to disturb the television landscape. Instead, as only the fifth custodian of “The Tonight Show” in 66 years, the gangly redhead was in line to maintain the status quo by extending the life of one of the medium’s oldest programs. But when NBC’s plans for Jay Leno to pass the baton went haywire, O’Brien decamped to the fragmented world of cable. TBS, a younger-skewing cable channel owned by Time Warner, splashed out $10 million for him to define its comedy-focused lineup.
J. Christopher Flowers could turn out to be the Falco of private equity. For now, the former Goldman Sachs banker can only claim the investment equivalent of the Austrian pop star’s 1980s smash single “Rock Me Amadeus.” Flowers is cutting new deals with a different groove to escape the dreaded one-hit wonder status. But it won’t be easy.
His first big bet, in Japan’s Shinsei Bank, made Flowers a billionaire. But he followed it up with huge, cringe-worthy acquisitions of Hypo Real Estate and HSH Nordbank in Germany and the Dutch NIBC, deals that either have been wiped out or are limping. Even an attempted remix, a return to Shinsei, has struggled. Given that Flowers focuses exclusively on the financial sector, it may surprise some even to learn he’s still dancing. Then again, investors might have expected if anyone should have had a sense of a storm brewing, it was Flowers.
Television royalty is in another one of its unsavory tiffs. One king of content, Rupert Murdoch, is squaring off with a member of the distribution ruling class, Cablevision, led by James Dolan.
The cable operator serving 3.1 million subscribers in the New York area has blocked access to News Corp’s Fox programming as the two companies tussle over retransmission fees. Such fights aren’t uncommon but the stakes are becoming higher because so much programming can be found online. Each new spat gives customers a reason to pull the plug, which would hurt both sides.
Only six months to showtime for Todd Combs. The hedge fund manager handpicked by Warren Buffett to manage a portion of Berkshire Hathaway’s investment portfolio arrives as a virtual unknown. But the thousands of shareholders who regularly descend on the company’s annual meeting in Omaha will expect that to change by next April’s gathering. By then, Combs will need to master more than just financial performance.
He at least seems to have that aspect of the job under control. At Castle Point Capital Management, Combs managed barely $400 million in his long-short fund, only a fraction of what he eventually will inherit at Berkshire, which has some $100 billion to invest. Still, Combs in July told investors his fund had gained 28 percent since its November 2005 inception compared to a 49 percent fall in a financial services sector fund used as a benchmark. His best year was in 2007.
A new Blackstone biography looks like one of the less impressive investments Steve Schwarzman has made — with his time. The private equity firm’s co-founder cooperated on the chronicle, entitled “King of Capital,” penned by two financial reporters. It’s true he will have gotten his side of the story — as do co-founder Pete Peterson, Blackstone president Tony James and other partners — woven into versions provided by friends, foes and former colleagues. But the abundant deal details and scant personal ones don’t add much to a public image that is largely a caricature of self-interested capitalism.
Some well-crafted set pieces, including an early hapless fundraising trip that leaves Schwarzman and Peterson standing in a downpour without a check, an umbrella or a taxi, help nudge the narrative along. What resonates most, however, is not the kind of financial drama found in tales like “Barbarians at the Gate” but rather a litany of buyout minutiae accompanied by some acknowledgments and score-settling. There’s ample space devoted to the significance of Schwarzman’s recruitment of James, for example, and to laying many failed deals at the feet of former partner David Stockman.
— The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By Jeffrey Goldfarb
NEW YORK (Reuters Breakingviews) – No Hollywood producer would put the tortuous MGM saga on screen. Activist investor Carl Icahn roundly mocked, and blocked, an earlier plan to combine the storied but troubled studio with Lions Gate.
The private equity owners of Univision have scripted a telenovela-worthy twist. They larded on debt to buy the U.S. Spanish-language broadcaster four years ago. In the process, they saw off rival suitor and Univision’s frequent arch-rival Televisa. The Mexican media group is now avenging its loss by buying in at a big discount to the original deal. The upside for Univision’s current owners, including Haim Saban and Providence Equity, is that Televisa gives their investment in Univision a better chance at a happy ending.
The $13.7 billion leveraged buyout of the company in 2006 became a poster child of the private equity boom. The valuation, more than 15 times EBITDA, was heady even for a company expected to outpace its TV rivals. And if the deal’s debt level at over 12 times EBITDA wasn’t the highest of the period, it came close. Fast forward, and even though Univision’s specialty in the fast-growing Spanish-language market has shielded it from the worst of the advertising downturn, the economic bust has taken its toll.
TPG’s investment in a $5 billion leveraged takeover of MGM in 2004 turned out to be a turkey. The film studio’s owners are now on the verge of getting wiped out. But that isn’t stopping TPG from testing the shark-filled waters of Hollywood again. The private equity firm is buying a 35 percent stake in Creative Artists Agency, the firm best known for representing stars like George Clooney and Julia Roberts.
At least TPG looks to be wading in to a depressed market. Studios have struggled to rustle up financing for movies, meaning fewer of them get made, actors earn less and, consequently, fees tumble for agents. Digital distribution of TV shows also is causing ructions.
Independent merger advisers should relish their moment in the sun. The busiest among them have grabbed a record share of the U.S. market this year. Bulge-bracket banks suffered distractions and defections as mid-size deals, and less conflicted advice, have become all the rage. That has helped the crop of firms, including startup boutiques, who are small enough to fail. But the phenomenon may be short-lived.
The shift has been explosive of late. A decade ago, the 16 non-supermarket-type institutions in the top 25 rankings of M&A advisers had about 6 percent of the so-called deal wallet, according to Thomson Reuters data. By 2008, their share had crept up to 10 percent. This year, the group, which includes established advisers like Greenhill and newbies such as Moelis, is at 20 percent.
Wall Street just lost some insurance in more ways than one. At the eleventh hour, Liberty Mutual Group yanked the initial public offering of its property and casualty arm. The $1.2 billion deal would have been the biggest U.S. flotation so far this year. It was also being closely watched as a barometer of investor appetite for the swollen backlog of new share sales meant to keep bankers busy. Weaker trading volumes already had many of them nervous about their fates. If IPOs flag too, more jobs could be on the line.
Liberty Mutual fell back on an old chestnut to explain the indefinite postponement: an “unfavorable environment.” Of course, the environment was less unfavorable for Country Style Cooking Restaurant Chain, the Chinese eatery whose new issue a day earlier closed 47 percent above the offer price. The specifics of the insurance industry and Liberty Mutual Agency undoubtedly made this particular deal hard to get away. Policy sales expectations, comparative valuations, a dual share structure and use of the proceeds all conspired to keep prospective buyers at bay.