1 Potential Monetization Opportunities - PowerPoint Presentation

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Potential Monetization Opportunities

September 22,

2009

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Executive Summary

We are actively pursuing the sale of our 33.3% stake in

HBO Central Europe

to Time Warner, which would generate cash of $80MM and a $40MM gain; targeting close in February or March 2010 assuming a 4-6 month regulatory approval process; transaction would be structured to protect SPE’s ongoing operating relationship with HBO in the territory

Also in preliminary negotiations with Time Warner to sell all or a portion of our 29.4% stake

HBO Latin America; transaction would generate $130-200MM in cash and a gain of $110-160MM; transaction to be structured to protect SPE’s ongoing operating relationship with HBO in the territoryExpecting SPE’s 20% interest in Shine to be sold by fiscal year-end, pending a good faith commitment from Shine to find a buyer for cash purchase price of at least $73MM for SPE stakePursue potential buyers for ITN, TV1 / Sci-Fi Australia, and FilmBank though monetization value limited to ~$10MM to $30MM; potential opportunity to swap minority stake in TV1/Sci-Fi for strategic majority interest in Hallmark AustraliaDiscuss ShowTime PMP which may risk $15MM license revenue and may only provide modest ($2MM gain), and FilmFlex which may create a loss if sold todayOpen to sale of remaining GSN stake which could generate ~$270MM in cash and $200MM in EBIT; however timing not within SPE control

SPT has identified

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potential monetization opportunities across networks, production and distribution businesses. Priorities are:

Potential Monetization Summary

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Shine

Key Considerations

As part of SPE’s funding in the Metronome acquisition, Shine made good faith commitment to find a buyer for SPE stake by end of FY10, with purchase price in cash of at least $73MM

Valuation Basis

DCF analysis based on terminal value of 10x EBITDA and 10% discount rate

Implied multiple of ~0.7x-1.0x FY10E revenue and ~7.5x-11x EBITDA

ShineDescription

Leading UK production super-indie with ownership of Reveille in U.S. and Metronome in Scandinavia

Equity Ownership

20% SPE; 56.3% Elizabeth Murdoch; 23.7% other

FY09A*

FY10E

FY11E

FY12E

Revenue(100%)

$359MM

$600MM

$679MM$718MMEBIT (100%)$26MM$54MM$77MM$88MMSPE EBIT$4MM$7MM$15MM$18MM* Calendar year. Note FY10-FY12E include Metronome acquisition

Note: SPE basis reflects proforma as of end of FY10

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GSN

Key Considerations

Sizeable divestiture; sale of our 35% stake could generate ~$270MM of cash and ~$200MM in EBIT

May be difficult to entice Liberty/DirecTV to acquire in the near-term

Buy/sell or put/call provisions are not triggered until December 2011

Liberty / DirecTV could acquire sooner but has shown little progress

Liberty has not yet executed Liberty Entertainment spin-off previously planned for JuneSubsequent merger with DirecTV is negotiated by not yet approvedValuation BasisValue estimate based on recent transaction values, may be at high-end of rangeGSN valued at $600MMFUN valued at $180MMImplied combined value of $780MMGSN

Description

Cable network with a primary programming focus on game show content with distribution to over 66MM homes

Equity Ownership

35% SPE; 65% Liberty Media

CY07A

CY08A

CY09E

CY10E

CY11E

Revenue(100%)

$126MM$134MM$218MM$219MM$234MMEBIT (100%) *$26.7MM$47.4MM$54.1MM$61.0MM$72.4MMSPE EBIT$13.8MM

$19.9MM

$19.0MM

$21.5MM

$25.5MM

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* CY07 and CY08 EBIT is before audit adjustments

ITN

Key Considerations

ITN is a smaller divestiture with our likely buyers (existing partners VSS or

Zelnick

) expected to be interested at discounted

price

SPE’s minority position and VSS’s approval right over our transfer limits number of potential buyersZelnick has confirmed that they are interested in acquiring our stake, but only at our cost ($8.5MM, or total valuation of $127MM)Exiting at fair value likely requires waiting for sale of entire company (timing TBD)Valuation BasisLow case based on DCF of historical average EBITDA (2006-09 for low end, 2000-09 for high end) and 20% illiquidity discount (implied 4.1 - 4.6x multiple)Mid case assumes no change in enterprise value from acquisition; pay-down of debt increases equity value over acquisition (4.8x multiple)High case based on DCF of historical average EBITDA (2006-09 for low end, 2000-09 for high end) with no illiquidity discount (5.1 - 5.8x multiple)Compares to trailing Omnicom multiple of 5.7x as of 4/24/09

ITN

Description

Develops and markets targeted national advertising through the aggregation of local television spot inventory

Equity Ownership

15% SPE; 78% Veronis Suhler Stevenson; 7% Zelnick Media and key management

CY06A

CY07A

CY08A

CY09E

CY10E

Revenue(100%)$152MM$203MM$200MM$162MMNAEBITDA (100%)$17.2MM$16.0MM$32.7MM$26.1MMNASPE EBITNA

NA

NA

NA

NA

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PMP Showtime

Key Considerations

While PMP provides positive EBIT and cash contribution, it is not a strategic asset

Potential negative impact to licensing revenue, currently ~$15MM per year, could be mitigated by securing a long-term contract

Buyers are some or all of existing partners

Valuation Basis

DCF analysis based on 8-10x EBIT terminal value and 10% discount ratePMP ShowtimeDescription

Leading Australian pay TV channel

Equity Ownership

20% SPE; 20% Liberty Media; 20% Paramount; 20% Fox; 20% NBCU

FY08A

FY09A

FY10E

FY11E

FY12E

Revenue(100%)

$79MM

$83MM$84MM$89MMN/ANet Income 100%)$6.1MM$6.2MM$5.3MM$5.6MMN/ASPE EBIT$2.3MM$0.9MM$1.2MM

$1.1MM

N/A

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TV1 / Sci-Fi Channel

Key Considerations

Positive EBIT and cash flow contribution but not strategic assets

Cash sale may be feasible due to presence of competitive buyers in the market

Universal has shown interest in acquiring TV1 as part of its efforts to consolidate the

Sci

Fi brand.Potential negative impact to licensing revenue, currently ~$3.5MM per year, could be mitigated by long-term contract.Asset may provide an opportunity to swap into a wholly-owned channelUniversal’s interest may allow us to “swap” our stake in TV1/Sci Fi for Hallmark Channel, which could then be re-branded to AXN or AnimaxDeal may require incremental cash of ~$5MMValuation BasisDCF analysis with 8x EBIT exit multiple and 10% discount rateTV1 / Sci

Fi

Description

Australian pay television channels

Equity Ownership

33.3% SPE; 33.3% CBS Paramount; 33.3% NBCU

FY08A

FY09A

FY10E

FY11E

FY12ERevenue(100%)$22MM$25MM$26MM$28MM$30MMNet Income (100%)$4.2MM$5.9MM$4.6MM$3.6MM$6.0MMSPE EBIT

$1.4Mm

$1.9MM

$1.8MM

$1.1MM

$2.0MM

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FilmFlex

FilmFlex

Description

UK VOD service on Virgin Media

Equity Ownership

50% SPE; 50% Disney

FY08A

FY09A

FY10E

FY11E

FY12E

Revenue(100%)

$56MM

$49MM

$53MM

$58MM

$64.5MM

EBIT (100%)$5.3MM$5.5MM$4.8MM$5.1MM$5.4MMSPE EBIT$1.9mm$2.3MM$1.6MM$2.2MM

$2.4MM

NOTE: projections do not include potential expansion to broadband and new territories

Key Considerations

With 3 years remaining on carriage agreement with Virgin, currently negotiating a renewal but may not reach agreement on an extension.

If renewal is successful, Filmflex has growth potential through expanding to broadband and new territories which would significantly enhance valuation if sale can be delayed until after expansion. Otherwise, expect venture to end in 3 years, with incentive for partners to cut costs and maximize value of remaining cash flow stream.

Delaying sale also allows time to potentially gain carriage with additional operator which would significantly enhance asset value

No obvious potential buyer – Disney has no desire to buy up and sale to Virgin would not generate attractive valuation.

Valuation BasisIf carriage is not renewed (i.e. no terminal value or expansion potential), expected enterprise valuation of $10-22MM implying ~2-4x EBITDA. This compares to a potential valuation of $40-60MM, if assume projected expansion into new territories and platforms as well as terminal value of 6-8x based on long term growth (implied current EBITDA multiples of 7-10x)Note: SPE and Disney bought ODG's share in 2008, at implied enterprise valuation of ~$40MM (excluding part of consideration paid in lieu of future dividends) 

FilmFlex

Low

Med

High

Enterprise

Value

$10.0

$16.0

$22.0

Less Debt

$0.0

$0.0

$0.0

Equity Value

$10.0

$16.0

$22.0

% Sold

50.0%

50.0%

50.0%

Cash to SPE

$5.0

$8.0

$11.0 SPE Basis($12.4)($12.4)($12.4)EBIT Gain / Loss($7.4)($4.4)($1.4)

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HBO Valuation, Cash, and Gain Considerations

Time Warner recently purchased Disney’s 29% stake in HBO Latin America on a $680MM valuation and is believed to have a hand-shake deal to acquire Disney’s 33.3% stake in HBO CE on a $235MM valuation

Sales of our HBO CE and HBO Latin America stakes at these valuations would generate gains of $147-202MM and cash of $210-278MM in FY10

Valuation Consideration

Gain and Cash Considerations

HBO EBIT Impact

FY10 impact assumed December 31, 2009 close of both transactions

FY09 EBIT from operations of $37.9MM from HBO Central America includes $26.3MM in dividends from sale of

Spektrum

FY10 EBIT from operation of $62.7MM from HBO Latin America

includes a one-time gain of $45MM for SPT not to exercise its right to buy-up as part of the Disney/TW transaction

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FilmBank

FilmBank

Description

UK leader in non-theatrical and pay TV services (key markets: Hotelvision, Seavision, Public Video Screening License)

Equity Ownership

50% SPE; 50% Warner Bros.

FY08A

FY09E

FY10E

FY11E

FY12E

Revenue(100%)

$13.0MM

$14.3MM

$15.4MM

$17.4MM

$20.0MM

EBIT (100%)($427K)$328K$405K$896K$1.5MMSPE EBIT*~$0~$0~$0~$0~$0

NOTE: Projections per management 9/09 forecasts, exchange rate used: 1.65 USD/GBP

*SPE equity pick up is nominal (based on 50%of net income figures), currently confirming actuals

Key Considerations

FilmBank is no longer a strategic asset - SPE’s annual licensing revenues (~$2-3MM) does not require equity participation and board involvement

However, no obvious potential buyers and Warner Bros. may be averse to SPE exit (Warner Bros. currently has favorable deal structure and SPE as owner guarantees SPE content)

Valuation Basis

Valuation estimate based on comparable revenue multiples of 1x – 2x and DCF valuation with terminal value of 10-15x EBITDA and 10% discount rate

Valuation may be discounted due to limited buyer interest12