(Recasts, adds executive interview quotes, more detail)
By Gavin Haycock
LONDON, Aug 28 (Reuters) - Broadcaster NBC Universal said on Tuesday it would 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.
Sparrowhawk and NBC’s relationship goes back several years starting with a licensing deal involving “Law and Order” and 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”.
NBC Universal International President Pete Smith said buying Sparrowhawk, which has around half its 200 staff based in London, was part of a strategy to get sales outside the U.S. to $5 billion inside three years from around $2.7 billion now.
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 BSY.L’s 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.
Smith said it was too early to say what jobs would be cut following the acquisition.
He said Sparrowhawk would maintain a significant presence in London, but that there were “certain areas of synergies” management from the two businesses would be looking at getting cost savings from over the next two months as the deal moves towards getting regulatory clearance.
Elstein said he might leave the business following the deal, but was looking to play an active role over the coming months.
He used to head Channel Five in the UK, was head of programming at BSkyB BSY.L from 1993 to 1996, has been a director of Virgin Media VMED.O since 2003, and holds a number of other chairman posts in the media industry.
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