The Walt Disney DIS Company hit it out of the ballpark when it received a bid for cable networks FX, Nat Geo and broadcast network ABC for $10 billion from Byron Allen. As I have written repeatedly on my blog, the cable network industry has been in decline for many years but most recently its problems have been exacerbated by the writers and actors guilds strikes, which has resulted in a dearth of fresh content on cable and broadcast networks.

The deal includes the ABC broadcast network, FX and Nat Geo, which reportedly generated $1.25 billion in EBITDA (Earnings Before Interest Taxes and Amortization) over the last 12 months, resulting in an 8x trailing cash flow multiple.

The multiple, however, much be substantially because of the decline in viewership thus far in the year, which likely resulted in significantly lower ad revenues for ABC and the cable networks being sold. That being said, there could still be a bidding wars as Nexstar has reportedly has been kicking the tires at the ABC Network.

About 55% of the cash flow comes from the ABC network, with the remaining 45% coming from the cable networks. There have been few and far between transactions for cable networks in recent years due to the impact of cord cutting and cord shaving, which has significantly shrunk cash flow at most cable networks. The fact that Byron Allen has faith in the sector may lead to more cable networks coming to market.

Allen owns Weather Channel and a number of TV stations and over-the-air networks which operate on a bifurcated band of the TV station’s main channel like Pets.TV, Comedy.TV, Recipe.TV, Cars.TV, ES.TV, MyDestination.TV, Justice Central.TV, The Grio Television Network, This TV and Pattrn.

He was in a recent fairly nasty public dispute with Nielsen Media Research, on which the currency that is paid for ad dollars is based.

In 2022, Allen sued Neilsen after his ratings bill went from $42,000 a month to $475K a month in 2022. Unfortunately, Nielsen is almost a lot like a lot of monopolies with too much power and leverage. Allen lost his filing for a preliminary injunction against the price increase but came back to court with a $2.2 billion fraud lawsuit against Nielsen.