Confidential Channel 5 - WikiLeaks UK/2014-01 Channel 5.pdf · Sale of Gate5 to Nokia ... experience advising on private equity ... −Launch of Demand 5 on Windows 8 and Samsung

Confidential

January 2014

PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATIONThese materials may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Credit Suisse AG or its Affiliates (hereafter “Credit Suisse”).

Channel 5

Discussion materials

Confidential

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Credit Suisse is one of the most active advisers in the media sector in Europe

1

Key examples of Credit Suisse expertise across all media sub-sectors

Pay-TV / cable / IPTV De Agostini acquisition of Zodiak Sole advisor on merger of Showtime and Orbit Mandated on Digiturk IPO Swisscom acquisition of Fastweb Sale of Premiere stake by Unity Media IPO of Premiere IPO of Neuf Cegetel IPO of Versatel

Sole Bookrunner in ITV bond Broker to ITV Acquisition of ATV – Sabah by Calik Acquisition of Zodiak by De Agostini IPO of Media Capital Antena 3 listing IPO of Endemol and subsequent acquisition financing KKR / Permira acquisition of ProsiebenSat1 Acquisition of Alliance Films by Entertainment One

FTA TV / content

Internet Sale of Ogone to Summit Partners Sale of Friends Reunited to Brightsolid IPO of Moneysupermarket.com Sale of Venere to Expedia Sale of Gate5 to Nokia Acquisition of Poliris (leading French property portal) by 3i 123 Multimedia IPO

Professional publishing / business information

Adviser on sale of UBM Data Services division Advisor on the acquisition of a majority stake by Hellman & Friedman in

Wood Mackenzie Adviser on sale of Cerved Adviser to Seat on sale of WLW to Bisnode Broker to UBM and DMGT Adviser and sole MLA on the acquisition of Bureau van Dijk for BC Partners

Capital Radio / GWR merger Lead financial advisor to GCap Media plc on its sale to Global Radio

Sole Bookrunner in Controlinveste exchangeable bond Acquisition of ATV – Sabah by Çalik Sale of Süddeutscher Verlag IPO of Vocento Axel Springer / ProSiebenSat1 financing Active on many other deals such as DMGT / Northcliffe

Newspaperpublishing

Radio

Selected media transactions

Financing and IPO transactions

€6,630,504,000

July 2007

Snr. Sec. Facilities €501,378,000 Mezz. FacilityMandated Lead Arranger and Joint Bookrunner

Acquisition byand

Initial Public Offering€334,000,000

November 2006

Joint Global Coordinator and Joint Bookrunner

July 2011

Acquisition of BvD by Charterhouse and related financingFinancial Advisor and Joint Bookrunner

€940,000,000

Initial Public Offering

£168,000,000

Joint Global Coordinator

April 2011

M&A transactions

£375,000,000

June 2008

Sale of GCap Media plc to Global Radio

Lead Financial Advisor and Broker to GCap Media plc

£25,000,000

March 2010

Sale of Friends Reunited

Exclusive Financial Advisor to ITV

Undisclosed

July 2009

Merger of Showtime Arabia and the Orbit Group of CompaniesExclusive Financial Advisor on the merger

£1,100,000,000

July 2012

Acquisition of a majority stake in WoodMackenzie by H&F Financial Advisor to H&F

C$225,000,000

January 2013

Acquisition of Alliance Films by Entertainment One

Financial Advisor to Entertainment One

$3,300,000,000

May 2011

Acquisition of Warner Music by Access Industries

Lead Financial Advisor to Access Industries

October 2009

Convertible bond

Joint bookrunner

£135,000,000

£160,000,000Sale of UBM Data Services division to Electra Partners

February 2013Financial Advisor

€780,000,000

January 2013Lead Left Bookrunner

High Yield financing for Cerved LBO by CVC

€3,300,000,000Acquisition of Springer Science + Business Media by

July 2013

Financial Advisor and financing bank

$1,591,000,000€615,000,000Senior secured First Lien Term Loan

July 2013Lead Left Bookrunner

€1,300,000,000

Secondary public offering

April 2013Joint Bookrunner

Confidential

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Credit Suisse was involved in some of the highest profile transactions of 2013

2

EMEA rankings based on deals announced

Key M&A awards

Credit Suisse deal highlights

$3.9bn

Acquisition of the remainder in MAN SE

Pending

Financial Advisor

$24.4bn

Merger with Virgin Media

2013

Financial Advisor

$2bn

Merger with Sorouh Real Estate

2013

Financial Advisor

$4bn

Merger with Atlantia SpA

Financial Advisor

$2.2bn

Unsolicited bid for 44% of the company by a Kazakh consortium

2013

Financial Advisor

Pending

$2.9bn

Acquisition of the remaining 49% in Itera Oil & Gas from Itera OGK

2013

Financial Advisor

$4.4bn

Acquisition of a Springer Science+Media

2013

Financial Advisor

$3.9bn

Sale of the company by DLJ and TPG

Pending

Financial Advisor

$2.5bn

Sale of Mozambique oil & gas assets to ONGC

Pending

Financial Advisor

$982 $797 $697 $656 $559 $533 $532 $474 $452 $423

27.8

22.619.8

18.615.8 15.1 15.1 13.4

12.8 12.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0

200

400

600

800

1,000

1,200

GS MS DB JPM CS Barcl Citi Roth BAML UBS

Value ($bn) Mkt. share

Best M&A House Western Europe

Best M&A House in the Emerging Markets

Consumer Advisor of the year

Iberia Advisor of the year

Domestic deal of the year RBS/Worldpay

Austria and Switzerland Advisor of the year

2011 and 2013

Source: dealogic based on deals announced since 2008.

Confidential

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3

Leading UK M&A house with an unrivalled depth of experience across a range of complex situations

Credit Suisse has a strong record advising its UK clients on transformational acquisitions and disposals…

Our non-UK clients seek our expertise in cross border deals into the UK

Credit Suisse also has extensive experience advising on private equity transactions

…as well as bid defence and sellside roles

Defence / sale

Cross border acquisitions

£860m

Sale of Company to

Financial advisor2011

£2.4bn

Sale of Company to


£2.9bnSale of Company

to


$24.1bnAcquisition of


£3.4bnAcquisition of


£97.6bnDefence from an unsolicited offer

from

Financial advisor 2008

Sponsor M&A



$4.4bnAcquisition


$4.4bnAcquisition of Mey Icki from


$1.0bnSale of

to Itochu


£500mSale of KP Snacks to


Sale of Company to

Financial Advisor2012

$3.6bn

Acquisition of


$2.0bn

Packaging


2013Financial Advisor

£340mAcquisition of




Acquisitions, disposals and mergers for UK clients

$26.8bnSale of BP’s 50%

stake to


Merger with


$48.5bn$3.3bnAcquisition of

Division of


$4.4bnSecured majority

control of


Joint acquisition of

with GVC


$800m$2.6bn

Acquisition of 20% of


£6.4bn

Buy-out by founders


€850mAcquisition of


Confidential

1. Snapshot of Channel 5

4

Confidential

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Snapshot of Channel 5

5

Company overview

Key programmes

Business overview

The group’s original channel, Channel 5, is the fifth and final national terrestrial analogue network to launch, after BBC One, ITV, BBC Two and Channel 4− As a free-to-air TV broadcaster, it mainly broadcasts entertainment

programming, such as reality television, game shows and imported American drama

− It is the fifth most popular channel in the UK, claiming a 4.2% share of viewing throughout 2012

− In a typical month the channel reaches 45 million people− In 2012, Channel 5 accounts for 7.3% of TV advertising revenues

in UK(1)

The group also owns two digital channels, 5* and 5USA, which were launched in 2006− 5* targets16–34 year-old viewers with a mix of soaps, movies,

entertainment, drama and documentaries− 5USA brings UK viewers the best American drama series and

classic American action movies Other offerings include Channel 5’s video-on-demand service

Demand 5, providing viewers with online access to much of the channel’s peak time schedule − Channel 5 is the first UK terrestrial broadcaster to offer a download

service− The catch-up service is available on a range of platforms including

web (e.g. Demand 5 website, YouTube), television (e.g. BT Vision, Sky, YouView), game consoles and mobiles

Source: Company filings, press release.(1) Ofcom Communications Market Report 2013.

Founded: 1997

Headquarter: London, UK

Ownership: Wholly-owned subsidiary of Northern & Shell

(owned by British publisher Richard Desmond)

Key financials: 2012A revenue: £326 / €400 million

2012A EBITDA: (£4) / (€4.9) million

Big Brother

Group’s channels

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Key strategy

6

Multi-channel approach

The group owns a portfolio of channels with different focus

− Channel 5 provides viewers with a varied mix of programming which includes entertainment, sport, documentaries, kids, drama, News and films

− 5* provides pre-school shows under the Milkshake! Banner as well as dramas, films, soap operas and popular factual and lifestyle shows

− 5USA offers drama, films, sport, comedy and youth programming from the US

Brand defining content

A key strategic goal is to increase revenue streams through the development, ownership and exploitation of programming content

− A number of shows developed and co-produced internally and increased resources earmarked to be allocated to the in-house production business (e.g. News service brought in-house in 2012)

− Increased investment in the programming schedule on brand defining content with appeal to both audiences and advertisers (e.g. the most successful commission Big Brother secured in 2011)

Digital platform

The group continues to invest in digital platforms and is well placed to respond to technology-driven changes in viewing preferences

− c.2 million downloads of the Demand 5 iPad App and over 1 million downloads of the Xbox App since 2011

− Launch of Demand 5 on Windows 8 and Samsung connected TVs in 2013

− Major partner in the YouView consortium, the next generation of internet protocol digital terrestrial television service

Confidential

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Paul DunthorneChief Operating Officer

Nick BamptonDirector of Commercial Sales

Ben FrowDirector of Programmes

James TatamDirector of Digital Media

Channel 5Management and key decision makers

7

Former Managing Director at N&S’ TV business Portland TV Has worked at N&S for more than 15 years and promoted as Channel

5 COO in November 2012

Re-joined Channel 5 in November 2011 Former Director of Programming at Irish broadcaster TV3; other

extensive working experience includes Channel 4, BBC and ITV

Re-joined Channel 5 in November 2010 Former Managing Director at Viacom Brand Solutions and founder of

media start-up The Third Way

Held senior positions at Channel 4 and BBC, focusing on digital platform development

Richard DesmondFounder and owner of Northern & Shell

Robert SandersonFinance Director of Northern & Shell

British publisher and businessman Has been media entrepreneur throughout his working life; founded

Northern & Shell in 1974 at age of 21 and since then he has developed the group into all main sectors of specialist and consumer publishing as well as television, radio, book publishing and internet activities

Joined Northern & Shell in 1995 as Financial Controller, became Deputy Finance Director in 1998 and took up his present position since 1999

Previous work experience includes Financial Accountant at Reuters Group, Grant Thornton and international PR company Shandwick

Key management

Key decision makers at N&S

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Key historical financials

8

Revenue EBITDA(1)

EBIT(1) Net income(1)

344

272290

356

326

2008 2009 2010 2011 2012

12.2

3.6

13.1

39.9

(4.0)

2008 2009 2010 2011 2012

0.4

(8.5)

0.3

27.0

(16.6)

2008 2009 2010 2011 2012

(18.3)(12.0)

17.9 26.9

(26.2)

2008 2009 2010 2011 2012

Source: Company filings (Channel 5 Broadcasting Limited). (1) Pre exceptional expense. EBITDA reported post operating lease rentals and foreign exchange gains / (losses).(2) Source: Financial Times, 1 January 2014.

(FYE Dec, £ millions) (FYE Dec, £ millions)

(FYE Dec, £ millions) (FYE Dec, £ millions)

Financial performance in 2012 negatively impacted by certain high profile events in the year, particularly the Olympics, Paralympics, Euro 2012 and the Queen’s Jubilee, all of which were the broadcasting preserves of the BBC or other principal commercial rivals

The performance in the early part of 2013 (H1 2013 EBIT of £20.6m(2)) underlines the directors’ firm belief that the business has been positioned for growth

Confidential

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UK audience viewing shares evolution

9

As the fifth largest TV broadcaster in UK, Channel 5’s viewing shares have remained stable over the last three years

Source: BARB.

–

5%

10%

15%

20%

25%

30%

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

BBC 1 BBC 2 ITV (Inc. HD & +1) Channel 4 (Inc. S4C & +1) Channel 5 (Inc. +1)

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UK TV advertising revenue by share

10

Channel 5’s shares in terms of advertising revenue have slightly increased

Source: Ofcom Communications Market Report.Note: denotes Channel 5 power ratio.(1) Includes: ITV2, ITV3, ITV4, ITV breakfast, E4, More 4, Film 4, 5*, others.

35.1% 36.5% 34.2% 34.2%

17.2% 17.2% 16.2%

15.0%

6.6% 6.2% 7.8% 7.3%

25.1% 23.6%

24.8% 25.5%

16.0% 16.5% 17.0%

18.0%

–

10%

20%

30%

40%

2009 2010 2011 2012

ITV1 / STV / UTV Channel 4 / S4C Channel 5 Other multichannels PSB portfolio channels

1.4x 1.4x 1.9x 1.7x

(1)

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UK advertising expenditure

11

Television continues to account for a significant part of advertising expenditure in UK

26.1%

26.4% 27.8% 27.5%

26.6% 26.4% 26.0% 25.6%

39.4%

34.4%

31.3%

27.9%

24.4% 22.1%

20.6% 19.5%

23.0%

27.7% 29.4%

33.3%

37.0%

40.2% 42.2%

43.8%

11.5% 11.5% 11.5% 11.3% 11.9% 11.3% 11.2% 11.1%

–

10%

20%

30%

40%

50%

2008 2009 2010 2011 2012 2013 2014 2015

Television Newspapers and magazinesInternet Others (Outdoor, radio and cinema)

Source: Zenith report as of September 2013.

CAGR

'08 - '13 '13–'15

TV 0.7% 1.5%

Newspapers and magazines

(10.6%) (3.2%)

Internet 12.2% 7.7%

Others 0.1% 1.9%

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6.0% 6.2%

5.0%

3.2%

6.8%

Q1-14 Jan-14 Feb-14 Mar-14 2014E

TV advertising net revenue growth (y-o-y%

change)

Research is optimistic about European ad markets

12

Advertising Monitor

2012 2013E 2014E

Germany 1.5 3.0 3.0

UK 0.6 3.1 6.8

France (7.0) (4.0) 2.8

Italy (11.0) (10.5) 4.0

Spain (18.0) (5.5) 11.3

Norway NA 7.0 5.0

Russia 10.3 8.0 7.0

Belgium NA 3.0 3.0

Source: Credit Suisse proprietary survey (European advertising monitor, December 2, 2013).Note: European Advertising Monitor research report from Credit Suisse is frequently publish by our analysts and it talks about

advertising trends in Europe. It is a proprietary survey of European TV media buyers that includes feedback from 20 agencies in 8 territories.

UK media buyers report broad-based strength in the TV advertising market going into 2014

− Growth is expected to accelerate vs. 2013 driven by the strengthening economy and the World Cup

− Advertisers are “responding to positive economic indicators” in Q1 2014, which is giving them confidence to invest at the start of the year

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Sale of Channel 5 to Northern & Shell

13

In July 2010, RTL Group, the leading European entertainment network, announced the sale of Channel 5 to the Northern & Shell company owned by British publisher Richard Desmond

− Channel 5 experienced significant revenue and profit decline relative to the market in 2008 and 2009; the company underwent a comprehensive restructuring process at the time of sale

Rival bidders were Channel 4, Time Warner and Endemol

Transaction documentation signed and closed with immediate effect on 23 July 2010

Total cash consideration payable to RTL Group for its 100% shareholding amounted to £103.5 million (€125 million)

− The deal valued Channel 5 at LTM revenue multiple of 0.4x and LTM EBITDA multiple of 12.4x

Source: Company information.

Confidential

2. M&A considerations

14

Confidential

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Situation overview

15

Northern & Shell appointed Barclays to advise on a potential sale of Channel 5

− Process led by Matthew Smith (MD, Head of UK M&A) and Daniel Ross (MD, EMEA IBD Media and Leisure)

Process expected to be a competitive auction, possibly a two-stage process

− NDAs expected to be distributed at the end of January to early February and subsequent distribution of Information Memorandum

− Marketing materials (including Information Memorandum) largely prepared already, now awaiting final version of 2013 numbers to insert

Signing expected prior to the summer break (see timeline overleaf)

Interest so far from a broad array of bidders, although private equity seen to be relatively reluctant

1

2

3

4

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Illustrative timetable – Key milestones

16

Receive NDA

Select biddersinvited to Round II

First round bids due

Receive second round process

letter

Management presentation / site visit

Detailed due diligence

Receive draft SPA

Submission ofbinding bids and

transaction documents

Final negotiations

Signing ofSPA

February March April May June

3 10 17 24 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23

Phase I

Phase II

Finalnegotiationand signing

Receive IM and process letter

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17

Summary overview of typical two stage auction process

Review and discuss strategic fit of acquisition opportunity

Perform desktop due diligence

Seek intelligence and review competitive landscape

Consider pre-emptive bid Consider potential partnership Set-up internal project team Hire external advisors Negotiate and sign

confidentiality agreement

Review of Information Memorandum

Potential clarification calls with company

Develop business plan and perform valuation of business

Assess synergy potential and start developing integration plan

Develop financing structure and obtain financing support letters

Conduct preliminary anti-trust analysis

Identify key confirmatory due diligence

Obtain required internal approvals

Attend management presentation and Q&A/expert sessions

Written Q&A process Perform site visits Review vendor due diligence

reports (if made available) Review data room Secure financing SPA mark-up and initial SPA

negotiations Finalise business plan and

valuation Finalise anti-trust analysis Agree on bid tactics (offer

price vs. SPA terms) Obtain Board approvals

Review of ‘black box’ information (if applicable)

Final price and SPA negotiations

Review and finalise disclosure schedules

Draft transaction announcement

Sign financing arrangements Signing of transaction

Confidentiality agreement First round bid Financing support letters

Binding offer Binding financing

commitments SPA mark-up

Final SPA Final financing documents

Phase II(6-7 weeks)

Phase I(4-5 weeks)

Negotiation and signing

(1-2 weeks)

Ke

y w

ork

str

ea

ms

Ke

y d

ocu

me

nts

fr

om

bid

de

rs

Preparation

Note: Actual timetable depends on target’s sale process.

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Where Credit Suisse adds value

18

Project coordination

Overall co-ordination of the process and advisors

Main point of contact for the process

Sole interface with the seller’s advisors

Co-ordinate business, commercial, financial, legal and other due diligence / act as central point of contact for VDR and Q&A process

Negotiation support

Develop negotiation strategy

Interface for negotiation with the seller and its financial advisors

Review of transaction documentation and support in negotiating the key commercial items

Assess competitive landscape

Monitor competitive landscape / provide intelligence

Affordability analysis of key competitors

Financial model and valuation

Preparation of financial model (stand-alone and synergy analysis)

Indicative valuation of Channel 5 as well as value of the synergies

Sensitivity analysis to allow for various business plan scenarios

Conduct other relevant financial analysis

Financing Evaluate various financing alternatives

Support in structuring the financing of the transaction

1

2

3

4

5

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Key due diligence questions

19

Market overview and competitive landscape

Outlook for the advertising market in UK and key trends / drivers of advertising market forecast growth

Trends on FTA share of total advertising in UK

Current competitive landscape and expected changes in the medium to long term (consolidation etc.)

Channel 5’s position in the market and expectation for market share evolution

FTA business

Channel 5’s content, target audience and age group; reach of Channel 5 in the market

Source of program contents: does it source from various content providers or depend on a selected few

Control over contents and security over key contracts (e.g. Big Brother expiration at end of 2015)

Scope of contracts with content providers and relevance of revenue distribution model is there is any

Purchasing / pricing power in the market

Proportion of local and international content

Scope and contribution of the digital businesses

Talent management and retention

Regulations and legal

Expiration of broadcasting licenses and the renewal fee and terms if there are any

Relationship with industry regulators

Any significant legal cases that have in the past affected or currently impacting the business

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3. Potential buyer analysis

20

Confidential

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Potential competing buyers: Strategics

21

Buyer name Market cap Key comments

£8.4bn

Again, very focused on international expansion and likely to take a serious look Has not made significant international steps so far

Gerhard Zeiler knows the business very well from RTL (in fact he signed the sale to N&S), however, would be open to re-investment now at Time Warner)

Time Warner is very active on European investment opportunities

Possible interest

Likely to show interest, but still not in an ideal position to explore significant international acquisitions

Jeff Shell now returned to US

Regulatory issues likely to be insurmountable

Has been keen on international expansion over time, but never shown real willingness to make sizeable investment

Likely to show strong interest in early stages

Source: Company information, FactSet as of 21 January 2014.

Possible interest, especially given UK TV investment FTA not previously a priority

EV EV/EBITDA FY1

£9.0bn 12.4x

£22.4bn £25.2bn 10.4x

£24.8bn £30.7bn 11.0x

£36.8bn £47.5bn 9.8x

£16.8bn £20.4bn 12.6x

£86.1bn £111.6bn 8.1x

£6.7bn £7.5bn 10.3x

£13.6bn Interest in multi-channel content business and not just a pay-TV platform Defensive move against BT

£14.3bn 8.3x

£44.8bn Possible interest, notably given Sky presence£53.6bn 12.0x/

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Potential competing buyers: Strategics (cont’d)

22

Buyer name Market cap Key comments

£11.9bn

Has sold out of most international assets Will likely take a cursory interest, but not likely to be a key bidder

Will certainly look at the asset and has considered FTA option. However, unlikely that Channel 5 would be additive to BT proposition

Likely to pass

Has not shown serious interest in FTA in the past and continues to focus on internal issues

Unlikely to be of interest

Is interested in international expansion as evidenced by Chellomedia, but Channel 5 likely to be a step too far

Virtually impossible, given previous troubled ownership by RTL

Possible interest, but unlikely to be very serious: focused on Scandinavia and Eastern Europe

Source: FactSet as of 21 January 2014.

Very unlikely buyer

EV EV/EBITDA FY1

£13.5bn 12.3x

£2.1bn £1.8bn 9.5x

£6.2bn £7.5bn 10.8x

£3.6bn £6.2bn 14.8x

£30.1bn £43.5bn 7.0x

£2.9bn £3.4bn 15.7x

£114.3bn £72.9bn 5.6x

£3.1bn £4.1bn 11.0x

£0.8bn £1.0bn 11.1x

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Potential financial sponsor buyers

23

Sponsor name Fund size

£8.3bn

£5.4bn

£4.5bn

£8.3bn

£4.5bn

£1.8bn

£4.8bn

£2.6bn

£5.6bn

£3.9bn

£9.3bn

£4.0bn

£16.6bn

£9.4bn

£7.5bn

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Comment Sponsor name Fund size Comment

Very media focused although with limited recent success

Media investments include: Sportfive, Primacom, Thomson Directories, AVIP Group, Equinity, Skillsoft, Avisium

UK based fund with significant experience in media, although with some mixed results

Media investments include: Springer, Medimedia, Aprovia, IPC, Newsquest, Truvo, Ziggo, Numericable

Recently sold Cerved, but still looking for media exposure

Media investments include: The Weather Channel, AMC Entertainment, Sinomedia Holding, Publishing Group of America, Cerved

Media investments include: Trader Media Group, Seat Pagine Gialle, BvD

Has shown interest in cable pay TV assets

Re-focusing attention on media at present and has identified data / growth assets as interesting area

Media investments include: Nielsen, Montecito, The Weather Channel, Houghton Mifflin, Livewire

Proven track record in the media sector Media investments include: All3Media,

ProSiebenSat.1, Asia Broadcast Satellite (ABS), Premiere

Less active in media in recent years but still over all active in the market

Media investments include: Aprovia, Health Central Network, LBI International, Nielsen

Focus in media directed more towards professional information and B2B type assets

Media investments include: TSL, TDF, Wood Mackenzie, Bureau Van Dijk

Very intelligent and innovative investor in media Was involved in Informa process in 2008 Media investments include: Axel Springer, Wood

McKenzie, F1 Holdings, ProsiebenSat1, Advanstar, Eller Media Company, Nielsen

Remains very active in media and looks for unique situations, has FTA experience

Media investments include: ProSiebenSat.1, BMG Rights Management, Primedia, Seven Media Group, Nielsen

TMT focused fund has shown keen interest in SBS and is a keen investor in content assets

Media investments include: JBP Holdings, Warner Music Group, Zenimax Media, RCS Media Group, Digiturk, MGM

Has historically tried to acquire ITV, however recently downgraded interest in Media following some challenging investments

Media investments include: Emap B2B, Trader Media, ALM, Hit Entertainment

Significant exposure to Media and recent good exit from Springer

Media investments include: Gala TV, AcadeMedia, Blizoo, United Digital Group, Springer Science + Business Media

Very limited attention to media in Europe Media investments include: Primedia, Adknowledge,

MGM, TDF, Univision, Findexa, IMS

Most focused on data and online assets, not really a media investor per se

Media investments include: DB Corp., IDC, Tulip Media

£8.9bn Looked seriously at SBS Media investments include: Nine Entertainment

Source: Company information, Preqin.

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4. Preliminary valuation considerations

24

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Channel 5 – Key financials

25

(in £ millions) Historical financials Forecasts

Fiscal year ended Dec 31 2010A 2011A 2012A 2013E 2014E 2015E

Revenue 289.7 356.3 325.7 332.2 338.8 342.2

% growth 6.5% 23.0% (8.6%) 2.0% 2.0% 1.0%

Normalized EBITDA 13.1 39.9 (4.0) 45.0 46.7 47.9

% margin 4.5% 11.2% (1.2%) 13.5% 13.8% 14.0%

D&A 12.8 12.9 12.6 12.8 13.1 13.2

% of revenue 4.4% 3.6% 3.9% 3.9% 3.9% 3.9%

Normalized EBIT 0.3 27.0 (16.6) 32.2 33.6 34.7

% margin 0.1% 7.6% (5.1%) 9.7% 9.9% 10.1%

Capex 5.2 6.0 3.5 5.0 5.1 5.1

% revenue 1.8% 1.7% 1.1% 1.5% 1.5% 1.5%

Changes in NWC 59.6 (3.4) 1.8 (0.5) (1.1) (0.6)

% changes in revenue 5.1% 6.0% 7.5% 17.0% 17.0%

Source: CS IBD estimates.(1) Net working capital includes the following line items: current asset (program inventory, trade debtors, prepayments and accrued

income); current liability (trade creditors, other taxation and social security, accruals and deferred income and other creditors). (2) Source: Zenith report.

Key assumptions

Financial forecasts based on CS assumptions

Channel 5 to return to profit in 2013 with EBITDA of £45m

Revenue for 2013 – 2015 assumed to grow at the same rate with UK TV advertising market(2)

EBITDA margin to improve moderately in 2014 and 2015

Capex equal to 1.5% of revenue

Net working capital equal to 17% of revenue

(1)

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Enterprise value 300 350 400 450 500 550 600

Implied EV multiples Metric

EV/Revenue 2013E 332 0.9x 1.1x 1.2x 1.4x 1.5x 1.7x 1.8x



EV/EBITDA 2013E 45 6.7x 7.8x 8.9x 10.0x 11.1x 12.2x 13.3x



EV/EBIT 2013E 32 9.3x 10.9x 12.4x 14.0x 15.5x 17.1x 18.7x

EV/EBIT 2014E 34 8.9x 10.4x 11.9x 13.4x 14.9x 16.4x 17.9x

EV/EBIT 2015E 35 8.7x 10.1x 11.5x 13.0x 14.4x 15.9x 17.3x

Illustrative acquisition matrix

26

(FYE Dec, in £ millions)

Comparable companies trading multiples - Median Comparable acquisition multiples - Median

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Overview of Trading Multiples as of 21-Jan-14 (in GBP millions, except share prices in local currencies; calendarised to YE 31-Dec)

Share % to Market Net Adj. Adj. EV/Revenues Adj. EV/EBITDA Adj. EV/EBITDA-Capex P/ECompany Price 52W H Cap. Debt EV 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E 2013E 2014E 2015E

Pay TVBSkyB 8.57 (9.9%) 13,641 1,236 14,291 1.9x 1.8x 1.8x 8.5x 8.3x 7.8x 12.0x 11.8x 10.9x 14.7x 14.3x 12.9x

Western EuropeAntena 3 / Atresmedia 13.96 (0.5%) 2,421 153 2,574 3.8x 3.6x 3.4x n.m. 27.2x 19.0x n.m. 34.1x 22.4x n.m. 38.7x 24.5xITV 2.05 (2.5%) 8,376 46 8,962 3.8x 3.6x 3.4x 13.9x 12.4x 11.4x 16.9x 13.6x 12.3x 19.0x 16.5x 15.0xM6 16.48 (9.0%) 1,706 (179) 1,527 1.3x 1.3x 1.3x 6.4x 6.1x 5.9x 9.5x 8.9x 8.6x 16.9x 15.9x 14.8xMediaset 3.81 (9.1%) 3,560 1,229 6,214 2.2x 2.1x 2.0x 20.6x 14.8x 11.4x 38.9x 22.5x 15.5x n.m. 31.1x 19.9xMTG 322.60 (12.1%) 2,115 122 1,797 1.4x 1.2x 1.2x 12.2x 9.5x 8.8x 13.7x 10.5x 9.7x 17.7x 15.3x 13.4xProSieben 35.00 (3.0%) 6,178 1,429 7,488 3.5x 3.3x 3.1x 11.6x 10.8x 10.2x 13.1x 12.2x 11.6x 19.0x 17.1x 15.9xRTL 93.90 (5.5%) 11,959 374 13,453 2.7x 2.7x 2.6x 12.7x 12.3x 11.5x 14.6x 14.1x 13.2x 20.2x 19.4x 18.3xTelecinco 9.27 (2.3%) 3,056 (70) 2,597 3.8x 3.6x 3.3x n.m. 25.7x 16.7x n.m. 28.3x 17.8x n.m. 36.8x 25.1xTF1 14.34 (4.3%) 2,501 (156) 2,300 1.1x 1.1x 1.1x 9.3x 9.2x 7.5x 11.2x 11.2x 8.8x 21.9x 22.9x 17.0x

Average 2.6x 2.5x 2.4x 12.4x 10.7x 9.5x 16.9x 13.3x 11.4x 19.1x 17.9x 15.7xMedian 2.7x 2.7x 2.6x 12.2x 10.8x 10.2x 13.7x 12.2x 11.6x 19.0x 16.8x 15.5x

Eastern EuropeCME 3.27 (50.9%) 267 501 770 2.0x 1.7x 1.6x n.m. 11.7x 9.3x n.m. 15.5x 11.9x n.m. n.m. 24.8xCTC Media 12.65 (9.3%) 1,196 (72) 1,123 2.2x 2.0x 1.9x 6.8x 6.4x 6.1x 7.3x 6.9x 6.6x 11.9x 11.7x 11.2xPolsat 19.40 (21.5%) 1,335 359 1,694 3.0x 2.9x 2.8x 8.5x 8.1x 7.7x 10.6x 9.9x 8.7x 14.0x 12.7x 10.8xTVN 14.80 (7.5%) 1,013 461 1,104 3.6x 3.5x 3.3x 11.1x 9.6x 8.3x 13.2x 11.3x 9.6x n.m. 17.6x 14.5x

Average 2.7x 2.5x 2.4x 8.8x 8.1x 7.4x 10.4x 9.4x 8.3x 12.9x 12.2x 11.0xMedian 2.6x 2.5x 2.3x 8.5x 8.1x 7.7x 10.6x 9.9x 8.7x 12.9x 12.2x 11.0x

Comparable European companies trading multiples

27

Source: Company information, Reuters consensus forecasts, FactSet as of 21 January 2014.(1) Average / median calculations exclude Antena 3 and Telecinco in Western Europe group and exclude CME in Eastern Europe

group, for comparability with the 2013E average / median.(2) Average / median calculations exclude Antena 3, Mediaset and Telecinco in Western Europe group and exclude CEM and TVN

in Eastern Europe group, for comparability with the 2013E average / median.

(1) (1) (2)

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Comparable acquisition multiples

28

Source: Company filings, broker research.

(£ in millions)

Ann't.

DateTarget Acquiror Stake Acquired Enterprise Value

LTM

EV / Revenue

1 YR+

EV / Revenue

LTM

EV / EBITDA

1 YR+

EV / EBITDA

Selected FTA Transaction Comparables

10/10/2013 e tv (Pty) Ltd SEARDEL INVESTMENT CORP. 19% 155 NA NA NA NA

07/04/2013 RRsat Global Communications Viola Group 20% 73 1.0x 0.9x 5.8x 5.5x

26/02/2013 Grupo Media Capital S.G.P.S. Vertix S.G.P.S. 10% 313 2.0x NA 8.9x NA

14/12/2012 SBS Nordic operation Discovery Communications 100% 1,078 NA NA 10.0x NA

03/10/2011 StarTV Dogus Yayin Group 100% 211 2.8x NA NM NA

08/09/2011 Bollore Canal+ 60% 244 NA NA NA NA

20/04/2011 Prosiebensat.1 Media AG Sanoma / Talpa 100% 1,083 3.0x NA 10.6x NA

15/11/2010 Telewizja Polsat Cyfrowy Polsat 100% 775 3.5x 3.3x 12.1x 9.8x

18/02/2010 bTV CME 100% 303 3.9x 3.9x 8.8x 8.8x

20/01/2010 Studio 1+1 Harley Trading Limited 100% 184 9.4x NA NM NA

23/03/2009 CME Time Warner 31% 1,755 1.8x 1.9x 6.5x 8.2x

31/07/2008 Nova Television Bulgaria MTG 100% 488 10.9x 9.2x NA NA

11/03/2008 DTV MTG 100% 197 8.3x 6.1x NA NA

15/12/2006 Prosiebensat.1 Media AG KKR/Permira 51% 3,938 3.0x 2.7x 14.0x 11.3x

27/06/2007 Prosiebensat.1 Media AG SBS 100% 3,300 NA 2.9x 14.8x 11.7x

29/08/2006 CME Apax 8% 1,472 5.3x 4.2x 17.2x 11.6x

26/10/2006 Grupo Media Capital Prisa 67% 480 3.2x 3.2x 15.9x 17.1x

03/11/2005 Grupo Media Capital Prisa 33% 557 3.9x 3.5x 19.8x 15.5x

26/09/2005 Star TV Dogan Yayin Holding 100% 255 NA 3.7x NA 21.5x

20/07/2005 Five RTL Group 35% 1,108 3.8x NA NA NA

11/08/2003 Prosiebensat.1 Media Saban Capital 36% 1,563 1.2x 1.2x 13.8x 12.0x

30/04/2003 Antena 3 de Television Grupo Planeta 25% 1,013 2.3x 2.1x 21.0x 13.2x

07/01/2003 Antena 3 Telefonica 12% 1,119 1.7x 1.7x 25.6x 12.0x

18/12/2002 Telecinco Mediaset 12% 2,178 4.0x 3.9x 16.9x 17.0x

24/12/2001 RTL Group Bertelsmann 22% 4,595 1.9x 1.8x 11.3x 8.2x

05/02/2001 RTL Group Bertelsmann 30% 10,611 4.1x 3.6x 24.6x 21.2x

07/04/2000 Pearson Television CLT-Ufa 100% 2,651 7.5x 7.1x 32.3x NA

Median 3.3x 3.3x 14.0x 11.9x

Mean 4.0x 3.5x 15.3x 12.8x

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Illustrative LBO analysis – Financing assumptions summary

29

Illustrative financing assumptions

Potential new LBO assumed on 31 December 2013

Entry valuation @ 10.0x EV/EBITDA 2013E

− 2013E EBITDA of £45m

− Implied purchase price of £450m

Total leverage up to 6.0x

− 6.0x Term loan B

− 7% pre-tax interest, 7 years maturity

Tax rate of 20% in line with UK corporate tax rate

Illustrative pro forma capitalisation

Sources and Uses – entry 31 December 2013

Sources £m

x 13E

EBITDA (1)% Uses £m

x 13E

EBITDA (1)%

Term Loan B 270 6.0x 60% Equity Value 450 10.0x 100%

Total Senior Debt 270 6.0x 60% Enterprise Value 450 10.0x 100%

Common Equity 180 4.0x 40%

Total Equity 180 4.0x 40% Fees and Expenses – – –

Total Sources 450 10.0x 100% Total Uses 450 10.0x 100%

(1) Based on 13E EBITDA of £45m as of 31-Dec-13.

(£ in millions)

FYE December 31, Amount %

x13E

EBITDA Tenor

Reference EBITDA 45

Term Loan B 270 60% 6.0xNet secured debt 270 60% 6.0x 7 yrs

Net debt 270 60% 6.0x

Common Equity 180 40% 4.0xSponsor Equity 180 40% 4.0x

Net capitalisation 450 100% 10.0x

PF Capitalisation

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Illustrative LBO analysis – Deleveraging profile

30

Note: Deleveraging profile above assumes no dividends paid.

Fiscal Year Ending 31 Dec 2014-2023 2014-2023

(£ million) 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Cumul. CAGR

Years from Closing (31-Dec-13) 0.0Y 1.00Y 2.00Y 3.00Y 4.00Y 5.00Y 6.00Y 7.00Y 8.00Y 9.00Y 10.00Y – –Revenues & Cashflow Statement

Sales 332 339 342 346 349 353 356 360 363 367 371 3,545 1.1%

EBITDA 45 47 48 48 49 49 50 50 51 51 52 496 1.4%

Capex (5) (5) (5) (5) (5) (5) (5) (5) (6) (6) (53) –Change in Net Working Capital (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (7) –

Operating Pre-Tax Free Cash Flow 40 42 43 43 43 44 44 45 45 46 436 –

Cash Taxes (assumed tax rate of 20.0%) (3) (3) (3) (3) (4) (4) (4) (6) (6) (7) (42)Cashflow Available Before Debt Service 38 39 39 40 40 40 41 39 39 39 394

Net Cash Interest Expense (19) (19) (19) (18) (18) (18) (18) (9) (6) (4) (147)Cashflow Available for Debt Amortisation 19 20 21 21 22 22 23 31 33 35 247

Mandatory Amortisation – – – – – – (270) – – – (270)Excess Cash Flow 19 20 21 21 22 22 (247) 31 33 35 (23)

Operating Metrics

Revenue Growth 2.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%EBITDA Margin 13.8% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% 14.0%EBITDA Growth 3.7% 2.7% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%Capex as a % of Sales (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%) (1.5%)Operating Pre-Tax FCF as % of EBITDA 86.7% 88.1% 88.1% 88.1% 88.1% 88.1% 88.1% 88.1% 88.1% 88.1%

Balance Sheet

Cash 1.00% – 19 39 60 81 103 125 – – – –

Revolver (£0m drawn at closing) +7.00% – – – – – – – 122 91 58 23Term Loan B +7.00% 270 270 270 270 270 270 270 – – – –

Total Debt 270 270 270 270 270 270 270 122 91 58 23

Total Net Debt 270 251 231 210 189 167 145 122 91 58 23

Credit Ratios

Leverage

Senior Net Debt / EBITDA 6.00x 5.39x 4.82x 4.35x 3.87x 3.38x 2.90x 2.42x 1.79x 1.14x 0.45xTotal Net Debt / EBITDA 6.00x 5.39x 4.82x 4.35x 3.87x 3.38x 2.90x 2.42x 1.79x 1.14x 0.45x

Coverage

EBITDA / Net Cash Interest 2.47x 2.56x 2.61x 2.67x 2.73x 2.79x 2.85x 5.97x 8.05x 12.69x(EBITDA - Capex) / Net Cash Interest 2.20x 2.29x 2.33x 2.38x 2.44x 2.49x 2.55x 5.33x 7.19x 11.33xCF Available for Debt Amortisation to Net Debt 7.4% 8.8% 9.9% 11.3% 13.1% 15.5% 18.8% 33.6% 56.0% 148.6%Excess Cash Flow to Net Debt 7.4% 8.8% 9.9% 11.3% 13.1% 15.5% n.m 33.6% 56.0% 148.6%Fixed Charge Cover 1.99x 2.08x 2.12x 2.17x 2.21x 2.25x 0.14x 4.59x 6.13x 9.54x

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Illustrative LBO analysis – Return analysis

31

IRR . CASH-ON-CASH

EXIT YEAR 3 - IRR EXIT YEAR 3 - COC

Entry Multiple 8.00x 9.00x 10.00x 11.00x 12.00x Entry Multiple 8.00x 9.00x 10.00x 11.00x 12.00x

Entry EV 360 405 450 495 540 Entry EV 360 405 450 495 540

8.00x 387 22.34% 9.41% (0.59%) (7.71%) (13.15%) 8.00x 387 1.83x 1.31x 0.98x 0.79x 0.65x

9.00x 436 31.59% 18.58% 7.75% 0.03% (5.86%) 9.00x 436 2.28x 1.67x 1.25x 1.00x 0.83x

10.00x 484 39.69% 26.52% 14.97% 6.73% 0.44% 10.00x 484 2.73x 2.03x 1.52x 1.22x 1.01x

11.00x 532 46.95% 33.58% 21.37% 12.68% 6.04% 11.00x 532 3.18x 2.39x 1.79x 1.43x 1.19x

12.00x 581 53.55% 39.95% 27.17% 18.06% 11.10% 12.00x 581 3.62x 2.74x 2.06x 1.65x 1.37x

EXIT YEAR 5 - IRR EXIT YEAR 5 - COC

Entry Multiple 8.00x 9.00x 10.00x 11.00x 12.00x Entry Multiple 8.00x 9.00x 10.00x 11.00x 12.00x

Entry EV 360 405 450 495 540 Entry EV 360 405 450 495 540

8.00x 395 18.36% 11.03% 4.82% 0.25% (3.34%) 8.00x 395 2.32x 1.69x 1.27x 1.01x 0.84x

9.00x 444 22.68% 15.46% 9.01% 4.26% 0.53% 9.00x 444 2.78x 2.05x 1.54x 1.23x 1.03x

10.00x 494 26.47% 19.31% 12.64% 7.73% 3.87% 10.00x 494 3.24x 2.42x 1.81x 1.45x 1.21x

11.00x 543 29.85% 22.72% 15.86% 10.80% 6.84% 11.00x 543 3.69x 2.78x 2.09x 1.67x 1.39x

12.00x 592 32.92% 25.78% 18.75% 13.57% 9.51% 12.00x 592 4.15x 3.15x 2.36x 1.89x 1.58x

Note: Returns exclude management dilution and exit costs.

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