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Proxy Fight Rages for Outdoor Channel

Your move, Stan.

In what is beginning to look like an old fashioned game of Texas Hold ’Em, Leo J. Hindery Jr.’s InterMedia Partners raised the ante for Outdoor Channel last week, bumping up its previous bid to $9.75 per share and trumping a revised offer for the hunting-and-fishing channel by billionaire sports mogul Stan Kroenke.

InterMedia’s latest offer is valued at about $253 million, about $50 million richer than its original November bid for the company and $26 million more than the $8.75 per share Kroenke Sports & Entertainment, the Denver sports conglomerate headed by Kroenke, proposed in March.

InterMedia touched off the most recent round of bidding on April 30, when it lobbed in a surprise $9.15 per share all-cash offer for the network. At the time, InterMedia managing partner Peter Kern said that given the synergies between Outdoor Channel, InterMedia’s own Sportsman Channel network and its 15 outdoor lifestyle magazines, it would be tough for any other rival to beat its offer.

“I do believe that nobody is in a better position than us to own this in terms of the economics of buying it,” Kern said after making the April 30 bid. “I think we’re all getting into nosebleed territory, but hopefully we put out enough to carry the day.”

But a day is about all the InterMedia proposal carried. On May 2, Kroenke Sports — led by the 92ndrichest man in the United States, with an estimated net worth of $5 billion, according to Forbes — wrote a bigger check, agreeing to increase its offer for Outdoor to $9.35 per share.

Outdoor Channel said at the time that its board of directors had accepted the new Kroenke Sports proposal and recommended its shareholders vote in favor of the deal in a special meeting of stockholders slated for May 8. On Friday, the network backtracked a bit, acknowledging that it had received the latest InterMedia offer and that its board “will review the proposal.”

The deep-pocketed Kroenke could easily keep the bidding going, and investors appear to be betting on it. Outdoor Channel stock soared again in early trading May 3 to $10.03 (up 6%, or 57 cents per share) suggesting that the bidding war could continue. Since April 30, Outdoor stock has risen about 18%, from $8.75.

Officials at Kroenke Sports did not return a request for comment.

In an interview last Friday, after it had made its latest bid, Kern said that InterMedia’s feelings about the channel haven’t changed.

“Like I said all along, we’re the right owners [for Outdoor],” Kern said. “Hopefully, we’re now in a place where I just can’t see how it can be worth this much to anyone but us. But you never know.”

And based on recent deals and the parties’ stomach for it, the price could rise once again.

Kern estimated that the current offer represents a 14 times to 15 times cash flow multiple for Outdoor. That compared to an average trading multiple of about 10.8 times cash flow for most media conglomerates, according to an analyst who did not want to be named because he did not cover Outdoor.

“It’s definitely above the comps,” Kern said of the price offered by InterMedia. “It’s rich territory. If we weren’t already in the industry and didn’t have the synergies and someone said ‘Hey, you could buy Outdoor Channel for 14 times EBITDA,’ I’d need that like a hole in the head.”

But Kern stressed that synergies with its Sportsman Channel and its magazine properties make the price worthwhile to InterMedia.

“We stretched [the offer] because we can do more with it, because we have synergies, because the economics work differently,” Kern said.

And recent deals have been even pricier. In January, Al Jazeera paid an estimated $500 million for Current TV, which is available in about 50 million U.S. homes. That multiple was an eye-popping 132.7 times 2013 cash flow, according to SNL Kagan.

Scripps Networks Interactive paid an estimated 17 times cash flow for The Travel Channel in 2009, but that network is fully distributed. Outdoor is available in about 38 million homes across the U.S.

TAKEAWAY

Field-sports service Outdoor Channel has become the target in an old-fashioned bidding war.