Magazine article Variety

Hot Market

Magazine article Variety

Hot Market

Article excerpt

Sniffing new revenue streams, buyers spent over $10 billion this year to acquire TV stations

Forget New York, Silicon Valley or even Sun Valley: The locus of the action in media M&A this year has been in places like Seattle, St. Louis, Houston and Phoenix.

TV stations in medium and small markets have been changing hands at a torrid pace, fueled by a perfect storm of eager buyers, motivated sellers and low debt-financing costs.

The value of U.S. broadcast TV station transactions this year skyrocketed to a whopping $10.4 billion as of Oct. 31 - compared to $1.8 billion for the same frame in 2012, according to analysis by media research firm SNL Kagan.

The 2013 tally includes Comcast's accelerated purchase of General Electric's outstanding 49% stake in NBCUniversal. In that $16.7 billion deal, about $1.8 billion was ascribed to the value of the Peacock's 10 NBC O&O stations and 15 Telemundo O&Os, according to SNL Kagan.

The new-model Tribune Co. made headlines with its $2.7 billion acquisition of 16 stations from Local TV Holdings. Gannett Co. nearly doubled its TV holdings by scooping up 20 Belo Television outlets in a $2.2 billion deal.

Those are big numbers for an advertising-dependent sector that has been fending off dinosaur perceptions in the digital age. What gives?

Simply put, it's about retrans and politics.

T he new revenue stream that local TV stations can now count on from multichannel video program distributors - or MVPDs, which includes cable and satellite providers - through retransmission consent fees have been incentive for the biggest of the broadcast groups to get bigger. And the gusher of political advertising dollars unleashed by the 2010 Supreme Court decision striking prior spending restrictions shows no signs of slowing down.

Most of that money flows to local network-affiliated broadcast stations.

No media concern has been more in the hunt for big game this year than Sinclair Broadcast Group. Already one of the biggest broadcast groups, Sinclair since January has added 57 stations to its arsenal in five transactions valued at nearly $2 billion. The biggest was the $985 million buyout in July of seven Allbritton stations, including the powerhouse Washington, D.C. ABC affiliate WJLA-TV. Sinclair at present has 164 stations (and counting) in 77 markets.

"We've tripled in size in the last 18 months," says David Amy, Sinclair Broadcast Group's exec VP and chief financial officer. "The opportunity doesn't come around very often when you're in a position to use the strength of your balance sheet to make deals and have the cost of capital as low as it is. From an M&A standpoint, it was like the perfect storm."

Amy notes that a big factor in the latest wave of station sales has been the exit of private equity players and the return of what he calls "television people."

Private equity funds began dabbling in TV station investments about eight to 10 years ago. But the cratering of the local advertising market in the 2008-09 economic meltdown threw a curve in the ROI models for those investments. That put added pressure on smaller operators with PE money behind them to sell.

Today's buyers are companies that intend to operate stations for the long haul, not flip them.

Like everything else in TV, the broadcasting biz has also become more complicated in the past five years, between the need to negotiate retrans pacts with MVPDs, to wrangling with network partners that demand a slice of local retrans coin. …

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