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It’s official: Scripps Networks Interactive (NYSE: SNI) will acquire a 65 percent stake in the Travel Channel from Cox Communications. The deal works like this: the two companies form a joint venture; Cox puts in the Travel Channel, valued at $975 million; Scripps contributes $181 million in cash; the JV borrows $878 million which will be guaranteed by Scripps and indemnified by Cox; Scripps controls the network. The net debt for the JV should wind up at about $696 million. The companies hope to close the deal by January.
Update: I initially made the mistake of adding the cash and borrow amounts together, coming up with a wrong number for the deal. But the right number for this leveraged JV depends a lot on perspective. With the Travel Channel as an asset valued at $975 million, Scripps’ share would be worth about $634 million; Cox’s at $341 million. That same split would follow for the debt — Scripps’ share would be about $452 million, Cox’s would be about $243 million. But even though Scripps will own only 65 percent, it’s on the hook for 100 percent of the debt as the guarantor — and the debt will be higher than the value of its share.