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NBCU, Equity Firms Buy The Weather Channel

NBC Universal concluded a deal Sunday to buy The Weather Channel for nearly $3.5 billion in cash, which catapults its online-news-information business to the top of the Web by augmenting its existing CNBC, MSNBC and NBC Weather Plus online businesses.

NBCU estimated that its Web business will rank No. 7 covering all sectors by adding TWC, which alone was No. 15.

Sunday’s deal is a definitive agreement and is scheduled to close by year-end, subject to normal regulatory approvals.

No purchase price was confirmed, but sources pegged it at nearly $3.5 billion, with NBCU and two financial partners funding the deal equally that will be a combination of equity and debt. NBCU’s partners are private-equity outfits Bain Capital and Blackstone Group.

The seller is closely held newspaper and broadcasting conglomerate Landmark Communications, which is owned by the Batten family of Norfolk, Va., and management. Landmark is attempting to sell its newspapers.

The deal will give NBCU parent General Electric a fresh story to present to investors in its second-quarter earnings call, which is scheduled for 8:30 a.m. Friday. GE disappointed Wall Street with poor first-quarter earnings that led to a sell-off of its stock.

“This will further position NBC Universal as the leading provider of news, information and weather, both online and on television,” NBCU president and CEO Jeff Zucker said in a statement. “Joining with The Weather Channel properties plays to our strengths in developing and programming cable networks and in producing and distributing high-quality content across multiple platforms.”

TWC will be operated as a stand-alone entity, based in Atlanta, with management services to be provided by NBCU and overseen by a board of directors of its three owners. NBCU’s management services encompass handling programming, ad sales and promotion, including cross-promotions with other NBCU properties.

Existing TWC management will be retained and given financial incentives, according to one source close to the transaction.

“This is a premier media asset with a unique position across all three screens -- television, PC and mobile -– and exciting growth prospects in each of them,” Blackstone Group senior managing director Michael Chae said in a statement. “We are looking forward to working toward its continued success with the management of The Weather Channel, the team at our corporate partner, NBC Universal, and our colleagues at Bain Capital.”

Private-equity firms typically hold businesses for 3-5 years, with exit strategies ranging from selling to strategic investors, such as NBCU in this case, or taking properties public in initial public offerings.

Blackstone is an experienced media/entertainment investor with stakes in or ownership of radio operator Cumulus Media Partners, broadcaster/newspaper conglomerate Freedom Communications, book publisher Houghton Mifflin and consumer data giant Nielsen. It also bought a stake in NBCU’s Universal Orlando theme-park business in 2000 and owns global theme-park operator Merlin Entertainment Group.

Bain & Co. is an investor in radio/outdoor conglomerate Clear Channel Communications, Cumulus and Warner Music Group. It part of a consortium that had owned German TV broadcaster ProSiebenSat.1 with TV tycoon Haim Saban, although that investment was sold.

TWC, which launched in 1982, has annual revenues of $550 million and 1,300 employees. Its Web site has upward of 40 million unique monthly visitors, ranking it No. 15.

The properties being sold are the TWC cable networks, and Weather Services International, which supplies information to local television stations and will help to beef up the NBC Weather Plus service mounted by broadcast TV stations. Also included are Enterprise Electronics, a manufacturer of meteorological radars, and Landmark's interest in Pelmorex, a Canadian weather company.

The nearly $3.5 billion purchase price, which is unconfirmed, is at the lower end of the $3 billion-$5 billion price tag suggested early in the auction.

According to an NBCU press release, TWC will be operated as a separate entity, based in Atlanta, with management services to be provided by NBCU.

The release said the transaction is “expected to be completed by year-end, and is subject to receipt of customary regulatory approvals.”

The announcement follows the June 13 announcement by NBCU, Bain Capital and Blackstone Group that they had entered into exclusive negotiations to purchase the TWC properties.

Deutsche Bank Securities was the lead financial advisor, and Allen & Co. and Credit Suisse also provided financial advice. Weil Gotshal & Manges and Ropes & Gray acted as legal advisors for the consortium.

Deutsche Bank Securities, GE Commercial Finance, GSO Capital Partners and Sankaty Advisors will provide the debt financing for the transaction.

JPMorgan acted as Landmark’s financial advisor. Landmark was represented by Norfolk, Va.-based firm Willcox & Savage and Atlanta firm Kilpatrick Stockton. Venable and Skadden, Arps advised on tax and other specialty issues.

Sunday's sale of TWC continued a trend of consolidation in basic-cable networks. For example, NBCU bought women’s cable network Oxygen for $925 million last year. Rainbow Media Holdings -- which owns The Independent Film Channel, WE tv and Fuse -- agreed to buy Sundance Channel for $496 million in May. And in recent years, QVC, E! Entertainment Television, Style, Speedvision, Bravo and Sci Fi Channel were acquired separately by media outfits to bolster their existing ad-supported basic-cable-network holdings.

The Wall Street Journal suggested Monday that “Attention in the media industry is expected to turn to a long-awaited sale of the Scripps cable-television business, which includes HGTV [Home & Garden Television] and Food Network.” Just days ago, those businesses were placed in a new stand-alone, publicly traded company, Scripps Interactive.

Bidders that dropped out of the TWC hunt and could be shopping for other cable properties include Time Warner, Comcast, Liberty Media and CBS.

Private-equity investors are also active in the TV-channel sector, attracted by its history of strong cash flow profit. For example, Oak Hill Capital Partners agreed to buy eight Fox-owned stations from News Corp. for $1.1 billion in December.

TWC upgraded its on-air product with the launch of an HD network last fall and the debut of a new HD studio and graphic look June 2.

The Weather Channel HD currently offers four studio shows in 1080-line-interface HD -- Your Weather Today, PM Edition, Abrams & Bettes and Evening Edition -- in addition to primetime documenatary programming, and the network expects to produce all of its shows in HD by August.

(Click here to watch Jim Cantore, Paul Goodloe and other on-camera meteorologists break in the new HD studio.)

TWC HD is distributed nationally by satellite operators DirecTV and Dish Network and carried in select cable systems operated by Comcast, Cox Communications, Time Warner Cable, Charter Communications and RCN. Just this week, Cablevision Systems announced that it will add TWC HD to its HD lineup by early August.

Glen Dickson and Ben Grossman contributed to this story.