Economics

This Day In Buyout History: PE Giants Take The Weather Channel Under Their Umbrella

Nine years ago today, a stark change occurred in the forecast for The Weather Channel.

From its formation in 1982 until then, the broadcaster had been owned by Landmark Communications, a private media company with a portfolio of various newspapers, magazines and TV networks. But on September 15, 2008, the high-profile trio of Bain Capital, Blackstone and NBCUniversal completed their acquisition of TWC for a reported $3.5 billion, bringing a station with reach to 97% of US cable subscribers under private equity control.

Well, kind of.

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The Weather Channel

The three buyers kept the specifics of their arrangement out of the public eye, so TWC's ownership structure wasn't entirely clear. However, reports at the time indicated that the deal was backed by $1.95 billion in equity, and that Bain Capital, Blackstone and NBCUniversal had each contributed equally to the investment. GSO Capital Partners, the credit arm of Blackstone, reportedly contributed another $600 million in debt. TWC's cable network and its website continued to operate independently under the corporate management of NBCUniversal.

Before too long, TWC began to show signs of its private equity backing. A few years after using $1.71 billion in debt to finance the initial transaction, the company's backers took on approximately $1.7 billion in new debt in January 2011. A little more than two years later, in June 2013, Bain Capital, Blackstone and NBCUniversal extracted a $600 million dividend from TWC, in the process increasing the company's leverage from 5.5x to 7.5x.

With profits banked, TWC's backers soon began exploring a sale, as reports emerged in the second half of 2014 that Blackstone and Bain Capital had met with JP Morgan Chase and Goldman Sachs to discuss an exit. Nothing came of it, though. And with the clock ticking on an investment now seven years old—in April 2015, Moody's downgraded TWC's debt rating from B1 to B2—the firms soon found another way to realize some returns.

Reports again surfaced that the company had hired bankers to explore a sale, and TWC unloaded its digital business—comprising its B2B, mobile and cloud-based web operations—to IBM for a reported $2 billion at the end of October 2015. About 900 former TWC employees joined IBM in the deal.

While Bain Capital, Blackstone and NBCUniversal continued to own TWC's actual television channel, the deal displays the breadth of the company's services. Far from just broadcasting forecasts over the airwaves, TWC also sells its vast cache of weather data to thousands of clients in the media, aviation and energy industries, among others.

And so it stands today—with The Weather Channel, or what's left of it, still owned by Bain Capital, Blackstone and NBCUniversal, nine years after their initial buyout. What comes next for the company? TWC has some employees who are experienced in making predictions. But then again, they usually keep their forecasts to the next 10 days.

Check out our previous coverage of buyout history.

Article by Kevin Dowd, PitchBook