Kids Europe Announces IPO
Fox Kids Europe announced its Initial Public Offering the week before last. The offering is expected to close before Christmas. According to preliminary information, Fox Kids’ revenues this year were $74.7 million (Euro70 million), with 58 per cent ($45.1 million) coming from programme distribution, 31 per cent coming from the Fox Kids channels themselves and another 11 per cent derived from consumer products.
Currently Fox Kids is 100 per cent owned by Fox Family Worldwide, which in turn is owned by Fox Broadcasting (49.5) and Saban (49.5) with a 1 per cent stake held by Allen & Co. As part of the equity transfer into the new company Fox Kids Europe gets a 15-year right of first refusal on any programming produced or acquired by Saban. Saban also transfers its current programme rights to Fox Kids Europe, valued independently at some $480 million, which Fox Kids Europe will acquire via a mixture of debt, cash and new equity. Those rights extend to Israel and the Middle East.
Fox Kids Europe sees considerable commercial advantages through the Internet and e-commerce activity, and for this reason has already brought in-house Fox Kids’ merchandising and licensing divisions.
Fox Kids Europe has begun active negotiations to enter the German and Italian markets with its own channels. While one analyst sees no great hurdles as far as Italy is concerned, especially with News Corp ultimately owning a 35 per cent interest in Italian pay-platform Stream, Germany is seen as representing a major challenge. Nickelodeon lost $100 million from its abortive Nick Germany venture which closed last year.
Fox Kids Europe now has in excess of 15 million viewers, some 9.4 million cable and the rest DTH. However, the prospectus shows that in the UK, Fox Kids Europe’s oldest market, it has still to break through both in ratings or profitability. It launched in October 1996 and currently gets an audience share of some 0.3-0.4 per cent overall (6 per cent of kids audience), lagging well behind the market leaders. In France the channel fares much better. Fox Kids in France has already reached break-even, and is the number one channel for kids (28 per cent share compared to Disney’s 19 per cent and Cartoon Network’s 13 per cent).
| Fox Kids revenue forecasts 1997-2004 ($m) | ||||||||
| 1997 | 1998 | 1999 | 2000e | 2001e | 2002e | 2003e | 2004e | |
| Revenue | 54.6 | 63.2 | 74.7 | 101.0 | 121.8 | 138.1 | 149.9 | 185.9 |
| EBITDA | 25.1 | 15.6 | 20.2 | 40.6 | 56.0 | 71.3 | 78.0 | 106.2 |
| Profits (pre-tax) | (1.6) | (5.2) | (4.0) | (0.5) | 0.7 | 1.2 | 1.4 | 1.6 |
| e= estimate Source: Company Data/Morgan Stanley Dean Witter |
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| Fox Kids channel revenue analysis | |||
| % of revenue | % of revenue | ||
| UK | 24 | Nordic | 3 |
| Germany | 23 | Poland | 2 |
| France | 21 | Spain/Portugal | 2 |
| Italy | 17 | Others | 3 |
| Benelux | 5 | ||
| Source: Morgan Stanley Dean Witter | |||
