The cost of travel has really gone through the roof.
Scripps Networks Interactive Inc. has bought a majority stake in the Travel Channel from Cox Communications Inc. in a cash-and-debt deal that values the little-watched cable network at $975 million.
Scripps is betting the channel will be a good fit with its other lifestyle networks, including Home & Garden TV and its majority stake in Food Network (which also counts Los Angeles Times parent Tribune Co. as an owner).
The steep price caught many analysts by surprise. When Cox first put Travel Channel on the block, most thought it would fetch $600 million to $700 million. Despite featuring such shows as Anthony Bourdain's "No Reservations" and "Bizarre Foods With Andrew Zimmern," the Travel Channel has no programs that regularly draw more than 1 million viewers.
But the cable industry has largely consolidated, and individual networks rarely go up for sale. That led to interest from Rupert Murdoch's News Corp., but this week the company backed away. NBC Universal also expressed some interest but soon became tied down in its own negotiations to be acquired by Comcast Corp.
Under the terms of the deal, Scripps will take a 65% stake in the Travel Channel and contribute $181 million in cash into the new entity. The partnership will take on $878 million in debt that will be guaranteed by Scripps and distributed to Cox.
The Travel Channel has done a nice job of boosting its ratings over the last few years, but analysts say there is still room for growth. Media consulting firm SNL Kagan says the carriage fees the Travel Channel charges cable and satellite operators amount to only 6 cents per subscriber a month, on the low end for the industry.
For 2009, the Travel Channel is projected to have revenue of $186 million and cash flow of about $70 million, according to SNL Kagan. Cox got the channel two years ago as part of its deal to sell its stake in Discovery Communications Inc.