NBC Universal agrees to buy Sparrowhawk Media

LONDON (Reuters) - NBC Universal said on Tuesday it will double the size of its cable operations outside the United States with the acquisition of Sparrowhawk Media, the private equity-backed owner of the Hallmark channel.

Sparrowhawk, with 18 channels, will be integrated into NBC's global networks division, bolstering its channel offering to 30 and bringing in an additional 60 million subscribers.

A source familiar with the matter told Reuters on Monday that NBC was buying Sparrowhawk for around $350 million.

Terms of the transaction were not disclosed on Tuesday.

The relationship between Sparrowhawk and NBC goes back several years, starting with a licensing deal involving "Law and Order." NBC is the biggest supplier of programming content to Sparrowhawk.

Hallmark's international channels broadcast across 152 territories in Europe, the Middle East, Africa, Latin America and Asia. Its library of classic films includes "Moby Dick" and "Gulliver's Travels."

Hallmark UK, the largest channel in the group, carries NBC Universal series such as "Law & Order," "House" and "Monk."

"This is an important move for us to grow our international business," NBC Universal Chief Executive Jeff Zucker said in an interview.

"Clearly, media is growing more outside the United States than it is inside the United States," he said. "So for us to be able to double our global networks business was just a unique opportunity."

NBC Universal executives said buying Sparrowhawk, which has around one-half its 200 staff based in London, was part of a strategy to boost sales outside the U.S. to $5 billion inside three years from around $2.7 billion now.

International President Pete Smith said there were considerable opportunities in the pay-tv industry in fast-growing markets over the next decade.

Roma Khanna, a former senior executive at Canadian media company CHUM Television, has been appointed to run the NBC's global networks division from September as part of NBC's plan to strengthen its London-based international business.

Sparrowhawk is a private equity group backed by Providence Equity Partners and 3i (III.L), which bought the international arm of the Hallmark Channel in 2005 for about $242 million.

Sparrowhawk Media Chairman David Elstein said the company had been courted by a number of potential trade buyers.

"We wouldn't have sold if we were not getting what we thought was value," he told reporters in a conference call.

"This is not a good moment for a private equity transaction because of the nature of debt markets ... trade players didn't seem to have a problem with cash," said Elstein.

Sparrowhawk runs Movies 24 and children's channel Kids Co. Movies 24 recently launched in the UK on BSkyB's (BSY.L)Sky and Virgin Media's (VMED.O) Virgin TV and there are plans to roll out the channel internationally.

NBC's line-up includes CNBC, Sci-Fi Channel, 13th Street and the Universal Channel.

Zucker and Smith said separately it was too early to say what jobs would be cut following the acquisition, but added there should be some cost savings.

Zucker also said the company would look to continue building its international business.

"It's a combination of acquisitions and organic growth," he said. "So we'll look to be opportunistic just as we were here."

NBC Universal is 80 percent owned by General Electric Co. (GE.N), with the rest owned by French media and telecoms group Vivendi (VIV.PA).

(Additional reporting by Paul Thomasch)