Minority Owners Angling to Acquire E Entertainment

The minority owners of E Entertainment Television have triggered a legal clause that would allow them to buy the successful channel from majority owner Time Warner early next year.

The four minority owners of E last month triggered a so-called Texas shotgun provision in the 1990 partnership agreement, forcing Time Warner, which owns 58% of the cable channel, to place a value on the network by early December. The minority owners--Comcast, Continental Cablevision, Liberty Media and Cox Communications--will then have 60 days to offer to buy Time Warner’s share at that price or force the company to purchase their combined 42% share.

Sources say the minority partners, each of which owns 10.4% of the cable network, are angling for a larger share of E, one of the most successful programming investments in each of their portfolios. Comcast, the nation’s fourth-largest cable operator, is believed to be leading the initiative.

The channel, which has grown significantly over the last six years, to 42 million subscribers, is valued at as much as $600 million by analysts.

But its partnership structure prevents the channel from being operated more efficiently by combining it with other networks owned by the various partners. Comcast, for instance, controls QVC.

Efficiencies in cable are becoming increasingly important as a trend toward original programming escalates costs and a shortage of excess channel capacity crimps subscriber growth in the United States.

In the case of E, Time Warner could put an inflated value on the network to prevent its partners from buying out its share. But it would have to be prepared to purchase the remaining interest at that price.

Some analysts say the network fits best strategically within Time Warner because of the cross-selling and cost-saving opportunities of combining the channel with the formidable group of networks acquired with Turner Broadcasting Systems, including CNN, TBS, TNT and the Cartoon Network. Time Warner also publishes People and Entertainment Weekly magazines and produces the syndicated entertainment show “Extra.”

Of the minority partners, sources say Comcast is most interested in increasing its stake in E as part of its recent initiatives to broaden its programming base. Last year, the Philadelphia-based cable company formed C3 with former Disney Television chief Richard Frank to create new channels and produce shows for broadcasters and cable. The venture has yet to start any channels.