Posts Tagged ‘NHL’

Disney Acquires Equity Stake in BAMTech

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Aug 09 2016

Disney announced a $1 billion acquisition of a minority stake in BAMTech, the entity holding Major League Baseball’s streaming technology and content delivery business.  The spin-out of BAMTech from MLB Advanced Media (“MLBAM”) was announced in late 2015.  The Disney investment in BAMTech had been rumored for several months.

In its quarterly SEC filing, Disney disclosed it acquired an initial 15% equity position in BAMTech for $450 million.  Disney has committed to purchasing an additional 18% equity interest in BAMTech for $557 million in January 2017.  Those two investments value BAMTech at $3.05 billion.

Disney declined to provide any specifics on BAMTech’s operating profile, though did note there is “some very slight dilution from the acquisition.”  However, Disney’s management felt this was more than offset by the trajectory of BAM Tech’s business and the opportunities to combine with Disney’s content properties, most notably ESPN.

Based on the previous public statements by MLBAM’s CEO Bob Bowman, the  $3.05 billion valuation level implies a revenue multiple of 12.2x expected 2016 revenue for BAMTech (please note several estimates involved in that calculation).

As part of the investment, Disney also gains the right to acquire majority ownership “in the coming years.”  The NHL currently holds a 7% – 10% equity position in BAMTech based on the August 2015 partnership deal between the companies.

The announcement coincided with Disney’s fiscal third quarter results.  During Disney’s call with analysts, CEO and Chairman Bob Iger, added context on Disney’s diligence of BAMTech.

“I love the business model because I love the quality of what they’ve created, largely from a technology perspective.  You’re look at an industry-leading platform.  And we did a fair amount of due diligence on this, speaking with people who have been clients of their service.  And also, we did our own due diligence in the sense that we’ve been clients of competing services.  And we concluded that what they’ve got is really robust” said Mr. Iger.

Since Disney is already a customer of BAM Tech, one immediate question is why Disney thought it was necessary to buy BAM Tech as opposed to renting its services as a customer.  During an interview with CNBC, Bob Iger responded to the customer vs. owner question from CNBC host Julia Boorstin.

“First of all, we think it is a good investment. We love their business model.  We think that in today’s world having the ability to stream on a scale basis live sports and live programming is a competitive advantage and something that is necessary.  We love the user interface.  So, overall we look at is as an investment.  But as a partner, as a part owner, and ultimately as a majority owner, we feel it gives us an ability to jump start not only ESPN, but are other business as well, into a space that we think is not only very exciting but extremely important in a very dynamic media marketplace.  So much better to own than to rent” responded Mr. Iger.

 

Related Content:

Press Release: Disney Acquisition of Minority Stake in BAMTech

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Disney Expected to Acquire 33% Stake in BAM Tech

Analysis | Posted by Josh Stinehour
Jul 05 2016

Bloomberg is reporting Disney has agreed to acquire a 33% equity stake in BAM Tech, the recent spin-out of MLB Advanced Media (“MLBAM”), the streaming technology division of Major League Baseball (“MLB”).  Forbes is separately reporting the deal is tracking toward completion later this summer.

Disney is reported to be purchasing the 33% equity stake in BAM Tech for $1.16 billion, implying a valuation of $3.5 billion.

As part of the investment, Disney also gains the right to purchase an additional 33% of BAM Tech during the next four years.  Should Disney exercise the option, it would become the majority owner of BAM Tech.  The NHL currently holds a 7% – 10% equity position in BAM Tech based on the August 2015 partnership deal between the companies.

MLBAM is jointly owned by all 30 MLB franchises, with each holding a 1/30 ownership interest.  BAM Tech comprises the technology service business of MLBAM serving third-parties (i.e. not MLB).  The August 2015 spin-out of BAM Tech was intended to enable MLBAM to accelerate commercial initiatives with third parties unaffiliated with MLB.

MLBAM is already responsible for several high-profile streaming services including CBS/Turner’s March Madness Live, HBO Now, PGA Tour Live, Sony Playstation Vue, watchESPN, and the WWE Network.

At the 2016 Re/code summit, Bob Bowman, the CEO of MLBAM, said he expects revenue of $1.2 billion to $1.3 billion during 2016 (a substantial increase over 2015 revenue of $800 million).  Mr. Bowman also stated a revenue split of 80 / 20 between baseball and third party revenues.  Those figures suggest BAM Tech was an approximately $160 million revenue business in 2015 and is set to grow to $240 – $260 million (50+% year-over-year).

Using those revenue estimates for BAM Tech, the Disney investment values the business at an approximate revenue multiple of 14x forward-looking sales (Note: several estimates were used to arrive at that valuation figure).  It is unknown whether part of this consideration accounts for the value of the option Disney received, which would allow Disney to gain majority control.  All things being equal, purchasing control should come at a premium.

 

Related Content:

Bloomberg Article Reporting Disney Investment

Forbes Article on Disney Investment in MLBAM

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

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