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Is Hearst 's 20% Stake in ESPN Now Worth $13.2 Billion?

Monday, November 26, 2012

In the aftermath of News Corp. buying a 49% stake in the Yes Network on Nov. 20, analysts pegged the New York Yankees' cable channel value at $3 billion. That, in turn, led Sanford C. Bernstein analyst Todd Juenger to estimate ESPN's net worth to be $66 billion.

That is quite a potential net haul for Hearst Corp. On Nov. 8, 1990, CEO (since 1979) Frank Bennack, Jr., negotiated the purchase of RJR Nabisco's 20% stake in ESPN for "between $175 million and $185 million." Using the Juenger valuation, that means that Hearst's share in ESPN has appreciated by nearly $366% to $13.2 billion.

It also meant that then-Paul Kagan associates media analyst Larry Gerbrandt was spot-on in telling The New York Times (Nov. 8, 1990) that the price was "surprisingly low" because it was 20% to 30% less than what might have expected prior to the [1990] credit crunch and concurrent soft-deal environment. The price also reflects concern about advertising spending [in 1991]."

That certainly helped enhance the stature of the Los Angeles-based Gerbrandt, who is now Janas Consulting managing director.

The biggest beneficiary from ESPN's growth is, of course, Walt Disney Co. It acquired the 80% stake as part of the May 1995 purchase of CapitalCities ABC for $19 billion. That sum is now dwarfed by, per Juenger, Disney's share in ESPN being worth $52.8 billion.

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