• by David Goetzl  @dgoetzl, October 31, 2008

Scripps Networks Interactive's hunger to acquire the remaining interests in its prized Food Network will continue for at least the near future. Negotiations with the Tribune Co. for its minority stake have stalled with the roiling credit markets and economic environment, making it difficult to attach a value to it.

Tribune owns 31% of the highly profitable network, and would seem eager to unload it, given its massive debt load. But a top Scripps executive said last week that a pause button has been hit on ongoing talks, as potential prices for a deal are in flux.

"I wouldn't call it off the table," said Joe NeCastro, CFO at Scripps, on a conference call. "We're leaning back in our chairs for a little bit while we try and see where the markets settle out and valuations settle out."

Tribune was taken private a year ago in an $8.2 billion deal led by investor Sam Zell. Zell has since sold Newsday, and is looking to unload the Chicago Cubs to help shore up the balance sheet.

The company is aiming to divest non-core assets to focus on operating its fleet of newspapers and local TV stations; the Food Network stake would seem to fall under that umbrella.

"I think Sam Zell would be very interested in monetizing his investment in the Food Network in order to deal with his financial position," said Ed Atorino, an analyst with the Benchmark Co.

Both Tribune and Scripps declined comment.

The Tribune stake could have fetched a considerably higher price back in the spring before the economic meltdown, but Zell appeared to have higher priorities. Zell has been somewhat reluctant to make deals that could saddle Tribune with a massive tax load, complicating negotiations for the Cubs and other assets.

NeCastro indicated, however, that this is not an issue with the Food Network--and talks between the two sides have centered on a structure that is agreeable to both. Other hurdles to reaching a deal have emerged. "I think we are comfortable the way the structure has evolved," he said, adding: "But it's very hard to engage when you're not really sure whether or not you're delivering the right value for your shareholders."

Under the current arrangement, Scripps pays Tribune cash annually for its stake, which came in at $63 million in 2007. That sum has risen steadily as Food Network's performance has improved--the 2007 payout to Tribune was up 65%, compared to the $38.2 million in 2006.

Even in the current circumstances, Tribune could fetch some $700 million for its 31% interest. A Barclays Capital report last week estimated that The Food Network would post $285 million in EBITDA next year.

A multiple of eight would be $2.28 billion--meaning that Tribune's 31% would be worth $708 million. During better times, Tribune may have been able to fetch 12 times EBITDA.