Considerations around Chellomedia
May 23, 2013 Notice to Recipient Confidential
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Chellomedia is the international content (4) division of Liberty Global Operator of global Largest Leading Pay-TV Provider of Leading playout Provider of Pay-TV It produces and markets 68 TV channels thematic channels independent channels provider premium channels service provider channels in Latin internationally and caters to close to 400 channel operator in across the CEE in the Netherlands America Spain & Portugal region million TV households in over 124 Channels
countries and 27 languages and JVs (1) 17 Channels (of 22 Channels (of 13 Channels (of 4 Channels 12 Channels (of which 8 through which 7 through which 1 through which 4 through Of these 68 TV channels, 48 channels JVs) JVs) JV) JVs) are 100% owned with the remaining 20 as joint-ventures, with companies such
as CBS, A&E, Polsat and Zon CBS Studios A+E Networks MGM MGM Multimedia JV Partners MGM Zon Multimedia OBN MGM Channels genres include sports, movies, children’s entertainment, documentary Channel Channel Channel Operator of Pan-European Channel and lifestyle management and management and management and Sport1 and Film1 digital TV management and representation representation representation Program sales services (channel representation Channels distributed through cable, Services Program sales Program sales Independent ad origination, post- Program sales satellite and IPTV networks sales house (At production and Media) satellite and fiber Program sales transmission) Moreover, Chellomedia provides advanced digital services such as ad Miami/Buenos sales (At Media in CEE) and broadcast Headquarters London Madrid Budapest Amsterdam Amsterdam solutions to a portfolio of leading Aires international channel operators (DMC) Key UK, EMEA, Asia Spain, Portugal, Latin America, CEE region Netherlands EMEA, Asia Also owns a 17% stake in Canal+ Regions (China) Africa Portugal, Africa Cyfrowy (DTH platform in Poland) and a non-controlling interest in O3B Networks FTEs 247 205 412 235 169 (Satellite data transmission in Employees (2) developing countries) although expected to be outside package for sale Subscribers (3) c. 170m c.40m c. 40m <0.5m c. 125m
______(1) Joint-ventures are 50:50 unless stated otherwise. (2) Full-time equivalent employees as of Q3-2010. (3) Subscribers include all subscribers consolidated and JV channels. (4) Chellomedia LatAm assumed to be residing with the Chellomedia Group as of December 2012. Financials presented on the next page are on a pro-forma basis to include the Chellomedia Latin America business. 1 Considerations Around Chellomedia Broad Range of Thematic TV Channels Covering All Genres
Target Geographic Subscribers Q3 2011 Chellomedia Genre Audience Reach 2010 (m) Revenues (€m) Equity Stake Commentary
Film1 is a premium film package of six dedicated Film Adults 20-49 Netherlands 0.4 32.3 100% film channels broadcasting the latest film releases
The top premium sports channel available covering Sports Adults Netherlands n.a. 1.7 n.a. Dutch and international sports
>50 Countries in TV channel dedicated to preschool children, and Kids Children 1-6 13.5 11.4 100% EMEA their parents and carers
>65 Countries in Sports Channel for the world’s most thrilling adventure Sports Male 25-44 23.9 9.2 100% EMEA and action sports programming
Hungary, Czech, Leading documentary channel in Central Europe Documentary Adults 26-55 3.8 8.9 100%
Owned Channels Owned Slovakia covering nature, science, technology, travel, etc. - Eastern Central Europe's leading children's channel with Children Children 2-12 9.5 8.3 100% Europe entertainment and educational programming
Canal Hollywood features the latest movies Film Families & Kids Spain 1.8 12.1 100% from American studios in Spanish Pay TV
Selected Fully Selected Spain / Latin Channel about international cuisine, travel to Cooking Adults +25 13.0 7.2 100% America exotic destinations, and captivating stories
Spain, Portugal, Shows a selection of international documentaries Documentary Women 30-54 5.3 8.8 100% Africa adapted to the tastes of Spanish audiences
Channel showing offerings from international Film Adults Global 16.2 9.3 50% studios and distributors (incl. MGM library)
Real life channel featuring staple CBS content Reality All Adults EMEA 22.1 n.a. 50% / 70% (1) including courtroom and investigative series
Broadcasts TV series ranging from glam super Drama All Women EMEA 10.7 n.a. 50% / 70% (1) soaps to murder mystery series
Main channel for action-packed American dramas, Action All Adults EMEA 10.7 n.a. 50% / 70% (1) tense thrillers, sci-fi and fast paced movies
(1) Presents independent cinema cult classics,
Selected Channels in JV in Channels Selected Film All Adults EMEA 23.1 n.a. 50% / 70% gripping series and exclusive interviews ______Source: Company disclosure, Factiva. (1) 50%:50% joint venture in the UK/Ireland, 70% ownership in other countries. 2 Considerations Around Chellomedia Chellomedia Key Financials (Consolidated) Drivers of Performance Historic Revenues ($m)
Organic growth of channel and service businesses
M&A-led growth 600 532.3 495.5 514.0 In-market consolidation 500 31.7 439.3 410.3 28.1 Upgrade of under-performing 400 assets 300 De-risking through partnerships 467.4 500.6 with platforms 200 Strict cost control 100 Historical $ growth impacted by FX 0 headwinds 2008A 2009A 2010A 2011A 2012A
Revenue Breakdown Restated revenues as per LGI FY12 10K data(1) (FY12) Poland Other Estimated Historic OCF ($m) 33% 22% 21% % margin 18% 17% 17% 17% 17% 12% 13% NL Hungary Spain Total: $514m
100 90.5 87.4 79.1 84.2 Assets Breakdown 80 69.8 (FY12) CZ Poland NL 60 6% <1% Spain 7% 24% 40 LatAM 19% 20 22% 22% Hungary 0 2008A 2009A 2010A 2011E 2012E UK Total: $449m ______Source: LGI 10K reports, BofAML IBK estimates. (1) Revenues restated and pro forma for acquisition of MGM Networks. 3 Considerations Around Chellomedia
Key Supportive Elements Key Concerns for Diligence
Largest independent thematic channels and digital Lack of “consistency” on format / positioning services business in Europe reducing opportunities for scale efficiency / benefit
High quality niche channels with strong market Limited scale in any given geography or genre positions Limited must have content Stable earnings profile due to long term carriage Macro-exposure: Spain, Eastern Europe, Argentina contracts and strict cost management Lack of global reach / scale for key channels Diversified revenue base across genres,
geographies, business lines and customers
Strong M&A capabilities and track-record supplementing organic growth
Beneficiary of the industry-wide shift in advertising spend to multichannel television
Limited dependency on LGI
4 Considerations Around Chellomedia Growth Through a Mix of Organic and Inorganic Growth
Acquisition of JV with MGM (50%) – Acquisition of Filmmuzeum/ JV with CBS (50:50) – launch JV with Polsat (50:50) – Canal+(100%) – premium Launch of movie channel in Paprika/Deko (100%) – of thematic channels using Launch of JimJam into the channel operator in NL CEE region (2) bouquet of lifestyle and CBS’s extensive catalogue Polish market movie channels
Acquisition of Sport 1 Acquisition of Minimax CEE (to 80%) – leading ( to 100%) – leading regional Acquisition of Teuve (100%) Acquisition of a 40% stake premium sports channel children’s channel – #2 Spanish channel in OBN, a free-to-air in Hungary (1) operator broadcasting network in Bosnia and Herzegovina
Nov-05 Aug-06 Mar-07 Jun-07 Jul-07 Sep-07 Oct-07 Sep-08 Jul-09 Aug-09 Dec-09 Apr-10 Dec-10 Aug-11 Aug-12
Acquisition of Documania Acquisition of JimJam JV with Scripps (20:80) – Acquisition of MGM (100%) – factual channel (100%) – leading EMEA launch Food Network & Fine Networks’ channels in consolidated into Odisea children’s channel Living Network across Europe, Africa and Asia as EMEA (3) well as the remaining 50% of the JV in Latin America
Acquisition of Multicanal Acquisition of Zone Media JV with Zon Sales of Buzz too THCI – JV Acquisition of Spektrum (100%) – leading Spanish ( to 100%) – further 10% Multimedia/DREAMIA (50:50) with AETN to launch C&I (100%) – leading regional independent channel stake in Zone Media (now – creation of bouquet in channel on back of migrated operator (4) documentary channel in movies and children’s Chello Zone) Buzz distribution Hungary genres with leading Portuguese cable operator
Cornerstone Acquisitions Bolt-on Acquisitions Joint Ventures
______(1) Increased to 100% in February 2010. (3) Chellomedia stake diluted to 11% in August 2010. (2) Consolidated in August 2010 and acquired in August 2012. (4) Initial stake acquired in January 2005. 5 Considerations Around Chellomedia Management Team
Photo Title Description
Niall Curran Niall Curran is President of Chellomedia, Liberty Global’s international content company and has been instrumental in the division’s considerable growth over the 10 year period, President during which he also served as COO Niall joined the group in 2000 focusing on operational restructuring, and in 2002, he took on leadership of the media operations and was subsequently appointed COO of Chellomedia in 2003 From 1995 to 2000 Niall worked for the Walt Disney Company, leaving from the position of Executive Vice President Operations for Walt Disney Europe. Prior to that he was part of the management team responsible for the international development of Disney channels, TV investments, programme distribution and production businesses Niall received a BSc in Physics from the University of Manchester, England Susan Elkington Susan is EVP for Entertainment Development and joined Chellomedia (UPC Media) in 2000. Prior to joining Chellomedia, Susan held posts as MD EMEA, BBC Worldwide and SVP, Executive Vice President, PolyGram TVI, Polygram Filmed Entertainment. Susan has an MA Hons in French and European history from Edinburgh University Entertainment Development
Simon Freer Simon heads the Corporate Development department and is the Group’s Chief Commercial Officer, with specific responsibilities for developing the group’s revenue through Mergers Chief Commercial and Acquisitions, organic growth and investment. Simon joined recently from 3i where he was global Head of TMT. Simon has a BA in Economic Geography from Southampton Officer University and has published a thesis on venture capital investment decisions
Alejandro Harrison Alejandro has been the CEO for Pramer SCA since 2005 and was recently appointed as the CEO of Chellomedia’s operating business in Latin America which includes MGM Latino. Chief Executive Officer, Previous to joining Pramer, Alejandro was International COO at Multicanal S.A., one of Argentina’s largest MSO’s, controlled by Grupo Clarín. Alejandro holds a Business degree Chello Latin America from the Universidad de Buenos Aires – Facultad de Ciencias Economicas and has completed post graduate studies at IAE Business School
Ron Huisman Ron is the Group CFO. In his previous role Ron was Vice President for Merger & Acquisitions at Liberty Global, where he has worked since 2000 in Strategic Planning, Finance and Chief Financial Officer M&A roles. Ron has worked on many of the transactions through which Liberty Global has expanded its business successfully over the past decade. Prior to joining Liberty Global, Ron worked for Arthur Andersen. He is a Dutch-qualified Chartered Accountant and holds a Master of Business Economics from the University of Maastricht in The Netherlands
Mike Moriarty Mike Moriarty heads up two of Chellomedia’s European businesses, Chello Benelux and Chellomedia, Central Europe. Mike joined UGC (predecessor to LGI) in 1993 and has Managing Director, served in a variety of senior finance and management roles including as Managing Director of Investments and Corporate Development. Before joining UGC, he held a variety of Chello Benelux and positions at Westinghouse Broadcasting (USA) for nine years. He received his MBA from the University of Pittsburgh and is a graduate of Villanova University Chellomedia, Central Europe Rutger Andree Wiltens Rutger joined the group in 2000 and now heads the legal team of the group, with responsibility for managing the legal aspects of all of its operations and business units. Prior to that, General Counsel Rutger worked at the Amsterdam and London offices for the international law firm Clifford Chance, where he trained and qualified as a solicitor, specializing in corporate law. Rutger received a first class law degree from the University of Southampton in 1994
Eduardo Zulueta Eduardo heads Chello Multicanal since he rejoined the company in 2005. Eduardo has held several responsibilities in the Spanish TV industry since 1989 such as MD of Molinare Managing Director, Spain, MD of Multicanal, Director of programming and content at DTH platform Via Digital, and MD of Fremantle Media for Spain and Portugal. Previous to his TV career, Eduardo Chello Multicanal worked for a number of years in the financial services industry at the corporate finance departments of Citibank and Bank of America in Spain. Eduardo has a Bachelor in International Economics from Georgetown University and a Master in International Finance from Columbia University
Dermot Shortt Dermot is the CEO of Chello Zone and he is responsible for the development of the global thematic channel business within Chellomedia. Dermot joined Chello Zone in January Chief Executive Officer, 2002 and was responsible for expanding the business and guiding the company through its sale to Chellomedia in 2005 on behalf of Advent International. Prior to Chello Zone he Chello Zone was a founding member of Discovery Networks Europe (DNE), building the reach of the network and developing their digital channels. Prior to joining DNE, Dermot worked in Corporate Recovery and for General Electric’s NBC. Dermot has a BSc in Management and is a qualified Chartered Accountant and Insolvency Practitioner
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