Blue Horseshoe didn't buck up for the Weather Channel...

The announcement of a $3.5 Billion NBC Universal/Bain/Blackstone purchase of the Weather Channel today represents several elements of the monumental shift that has occurred in the capital markets this year.

First -Pricing: In January when Landmark Communications initially began shopping the deal, the asking price was $5B, by accepting 30% less than their original number, Landmark has made the same hard acknowledgement that hundreds of Manhattan apartment owners have had to in recent weeks - that no rich US market centric Wall Street buyers are likely to chase bids, anytime soon.

Second -Financing: Three of the four primary financing sources are related companies to the Buyers - Blackstone's GSO, Bain's Sankaty, and GE commercial finance, with deal advisor Deutsche Bank as the fourth. In this market the only people doing deals are those that can finance them themselves. They also set the price.

Third -Attrition: This acquisition is an acknowledgement that NBC Weather Plus has been a bust and that the network has failed in its attempt to organically grow a viable competitor to the Weather Channel. This is the start of an important cycle where large companies that tried to grow for growth's sake (at the top of an economic cycle) are being sent packing. Misallocating capital gets people fired.

If you subscribe to the thesis that the current market shares many similarities with the early 1970's then it might be interesting to recall that the only guys that were able to get deals done in the mid and late 70's were junk bond traders - not bankers or entrepreneurial visionaries. The next couple years may prove to be a less friendly environment than many younger Wall Street professionals fully anticipate.

Andrew Barber
Director

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