By Soham Chatterjee
(Reuters) - AMC Networks Inc said it would buy Chellomedia, the international content unit of John Malone's Liberty Global Plc, for about $1.04 billion, giving it greater control over the global distribution of its programs.
Liberty Global, the largest cable operator in Europe, said the deal would help it simplify its business and allow it to focus on its core market, the United States.
AMC Networks, home to hit shows such as "Mad Men", "Breaking Bad" and "The Walking Dead", has been spending money to develop content and expand programming as it takes on HBO, Time Warner Inc's premium cable TV network.
"It seems like a good deal for AMC. They are basically going from 96 million affiliate subscribers to 500 million affiliate subscribers globally," Albert Fried & Co analyst Rich Tullo told Reuters.
Chellomedia's network, consisting of 68 channels, is distributed to 390 million households in 138 countries. Most of its programming comprises movies and entertainment and content acquired from partners.
AMC Networks said the businesses being bought include Chello Central Europe, Chello Latin America and Chello Zone.
The network will also acquire Chellomedia's stakes in joint ventures with CBS International, A+E Networks, Zon Optimus and other partners.
Tullo said the deal allows AMC to expand into high-growth eastern European markets, which have good intellectual property protection, and get access to Chellomedia's production assets.
"Chellomedia is an ideal platform ... it provides one, if not the largest, international channel groups not owned by a large content company," AMC Networks Chief Executive Josh Sapan said on a conference call on Monday.
AMC - A PRICIER BUY
Shares of AMC Networks were down 2 percent in afternoon trading as analysts raised concerns that the deal would make it harder for a larger media company to buy AMC, which was spun out of the Dolan family controlled Cablevision Systems Corp in 2011.
AMC Networks, whose channels also includes Sundance and IFC, has been speculated to be an acquisition target of cable network companies such as Comcast Corp, News Corp and CBS Corp.
"Given AMC's earnings outperformance over the past few years, we saw a notable opportunity to return capital to shareholders ... ahead of a sale of the company," BTIG analyst Richard Greenfield said.
"However, it now appears that AMC is decisively in growth mode, even before the next leg of original programming has proved itself."
While marquee shows like "Breaking Bad" and "Mad Men" have ended or are on their way out, AMC has been trying to replace them with new shows such as "Low Winter Sun", "Turn" and "Halt & Catch Fire".
Malone, known as the "King of Cable", jumped back into the U.S. cable market earlier this year by buying a 28 percent stake in Charter Communications. Until then, he had been on a decade-long acquisition spree in Europe.
"In our view, the (Chellomedia) disposal improves Liberty's liquidity to potentially help fund acquisitions," J.P. Morgan Cazenove analyst Carl Murdock-Smith said in a research note.
Liberty Global said it would retain Dutch premium channels Film1 and Sport1.
The company recently failed in its bid to buy out Dutch cable firm Ziggo, which rejected the offer as inadequate.
Liberty was also outmaneuvered by Vodafone Group Plc in competing bids for German operator Kabel Deutschland.
Liberty shares were up 1 percent.
Morgan Stanley advised Liberty Global on the deal, which is expected to close in the first quarter of 2014. Guggenheim Securities was the adviser for AMC.
(Reporting by Soham Chatterjee and Sruthi Ramakrishnan; Editing by Saumyadeb Chakrabarty)