Today’s agreement to pay $1B for Liberty Global’s international networks company Chellomedia “dramatically changes the investment thesis” for AMC Networks, BTIG’s Richard Greenfield says. Many believed that the pay TV network company was ripe for a takeover more than two years after Cablevision spun it off. It’s savoring the success of shows including The Walking Dead, Mad Men and the recently wrapped Breaking Bad and a big payoff from the resolution last year of its breach of contract complaint against Dish Network. AMC’s shares are up about 95% since it went public, and +46% over the last 12 months. But Greenfield downgraded AMC to “neutral,” noting that that even though “timing for a sale appeared ideal,” management’s time and attention now “will be shifted to a significant portfolio of global cable network assets.” Bernstein Research’s Todd Juenger says the deal means “slower growth, more financial risk, and [AMC] becomes harder to acquire.” But others say that AMC’s long-term prospects look rosier as it expands its global reach.
It’s “strategically and financially positive,” Stifel analyst Benjamin Mogil says, even though it may postpone a decision to return cash to shareholders. Guggenheim Securities’ Michael Morris also likes the fact that international sales soon will account for about 25% of AMC’s revenues, up from 3%, even though “expanding internationally is complex and will likely see some growing pains.” While AMC may have to take on additional debt for the deal, “the acquisition makes enormous strategic sense for the company,” says Neil Begley of debt rating agency Moody’s Investors Service.
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