Byron Allen makes $10B bid for ABC, other Disney channels

Media magnate and comedian Byron Allen has put up a $10 billion bid to acquire ABC and two cable channels – FX and National Geographic – from The Walt Disney Company.

Bloomberg first reported on Allen's unsolicited bid Thursday, and Allen's company, Allen Media Group, later confirmed that a bid had indeed been made. Bloomberg reported earlier that Nexstar Media Group has held talks with Disney about buying ABC and eight regional stations owned by Disney.

Bloomberg noted that Allen's bid is "preliminary and could change," citing a person familiar with the situation. Allen's original $10 billion offer is based on a multiple of eight times EBITDA (earnings before interest, taxes, depreciation and amortization), and the exec would need to work with banks and private equity firms to finance the proposed deal, Bloomberg added.

'No decision'

Disney acknowledged that it's been exploring options for its legacy businesses but said it hasn't made a decision on ABC or any other channel being sought by Allen.

"While we are open to considering a variety of strategic options for our linear businesses, at this time The Walt Disney Company has made no decision with respect to the divestiture of ABC or any other property and any report to that effect is unfounded," Disney said in a statement.

Related:Disney vs. Charter: Who came out on top?

ABC would be a big get for Allen's growing media empire. Allen started in the business as a comedian, landing his first public appearance on "The Tonight Show" in 1978 and later was a cast member of the NBC reality TV show "Real People." After starting Entertainment Studios in 1993, Allen created Allen Media Group in 2018. He acquired The Weather Channel in early 2018 and currently owns or operates 27 full-power and three low-power TV stations across 20 small and midsized US markets.

Allen's bid arrives a couple of months after Disney CEO Bob Iger said Disney's linear TV business "may not be core" to the company and confirmed that Disney was looking into a variety of strategic options for them.

"We have to be open-minded and strategic about the future of those businesses," Iger said. "They may not be core to Disney. The creativity and content they create is core to Disney, but the distribution model, the business model that forms the underpinning of that business, and that has delivered great profits over the years, is definitely broken."

Tough times for traditional TV

Allen's proposal also comes as Disney's legacy business is shrinking and the company ramps up efforts to achieve profitability at its direct-to-consumer streaming business. Disney's legacy business challenges stem partly from cord-cutting and a decline in the traditional pay-TV model.

Related:Disney hikes some streaming prices, eyes crackdown on password-sharing

For fiscal Q3, Disney's linear networks segment saw revenues dip 7%, to $6.69 billion, while operating income dropped 23% to $1.88 billion. Beneath that, revenues for Disney's domestic channels dropped 4%, to $5.5 billion, driven in part by lower advertising dollars and viewing for ABC, and rising sports programming and production costs in the cable networks division.

Problems with a broken pay-TV ecosystem are showing up in other ways, including Disney's carriage dispute with Charter Communications. Though Charter stressed it was willing to "move on" without Disney content, the sides struck a deal this week that includes higher rates for Disney content and some concessions that will allow Charter to bundle some of Disney's streaming services into its pay-TV packages.