The Radio Effects Of Sinclair’s Purchase Of Tribune Media
Sinclair Broadcast Group’s $3.9 billion purchase of Tribune Media will see News/Talk 720 WGN Chicago join the combined company with assets including over 200 television stations, WGN America, Tennis Channel, and three Seattle radio stations.
While WGN was a major part of Tribune’s holdings, the same will not be the case under Sinclair ownership. That said, since acquiring AC “Star 101.5” KPLZ, Conservative Talk 570 KVI, and News 1000 KOMO (plus LMA of 97.7 KOMO-FM) as part of Sinclair’s 2013 purchase of Fisher Communications, Sinclair has not done much in the way to affect how the radio properties are operated outside of the usual post-closing layoffs. The Seattle radio properties have seen little in the way of corporate intervention.
WGN, however, is not like most radio stations. With locally originating programming 24/7 and lack of overtly Conservative political lean that Sinclair instills in its news departments, there will be many eyes on what the future version of WGN Radio will look like.
Sinclair has operated radio properties before. The company sold six St. Louis stations to Emmis for $220 million and its other 46 stations to Entercom in 1999 for $824.5 million. Those stations make up the bulk of Entercom’s current clusters in Buffalo, Greenville, Memphis, New Orleans, and Scranton/Wilkes-Barre.
Sinclair Broadcast Group, Inc. (Nasdaq: SBGI) (“Sinclair”) and Tribune Media Company (NYSE: TRCO) (“Tribune”) today announced that they have entered into a definitive agreement under which Sinclair will acquire 100% of the issued and outstanding shares of Tribune for $43.50 per share, for an aggregate purchase price of approximately $3.9 billion, plus the assumption of approximately $2.7 billion in net debt.
Under the terms of the agreement, Tribune stockholders will receive $35.00 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune Class A common stock and Class B common stock they own. The total $43.50 per share consideration represents a premium of approximately 26% over Tribune’s unaffected closing share price on February 28, 2017, the day prior to media speculation regarding a possible transaction; approximately 14% over Tribune’s 30-day volume weighted average closing stock price; and approximately 8% over Tribune’s closing share price on May 5, 2017, the last trading day prior to today’s announcement.
Tribune owns or operates 42 television stations in 33 markets, cable network WGN America, digital multicast network Antenna TV, minority stakes in the TV Food Network and CareerBuilder, and a variety of real estate assets. Tribune’s stations, a list of which is available in Tribune’s most recent Form 10-K filed on March 1, 2017, consist of 14 FOX, 12 CW, 6 CBS, 3 ABC, 2 NBC, 3 MyNetworkTV affiliates and 2 independent stations. The group includes stations in the top three DMAs in the country, seven in the top 10 and 34 in the top 50 DMAs.
“This is a transformational acquisition for Sinclair that will open up a myriad of opportunities for the company,” commented Chris Ripley, President and CEO of Sinclair. “The Tribune stations are highly complementary to Sinclair’s existing footprint and will create a leading nationwide media platform that includes our country’s largest markets. The acquisition will enable Sinclair to build ATSC 3.0 (Next Generation Broadcast Platform) advanced services, scale emerging networks and national sales, and integrate content verticals. The acquisition will also create substantial synergistic value through operating efficiencies, revenue streams, programming strategies and digital platforms.”
“This will be the largest acquisition in our company’s history, and I want to thank everyone from the Sinclair team, as well as our advisors and bankers who made this possible,” commented David Smith, Executive Chairman of Sinclair. “Television broadcasting is even more relevant today, especially when it comes to serving our local communities. Tribune’s stations allow Sinclair to strengthen our commitment to serving local communities and to advance the Next Generation Broadcast Platform. This acquisition will be a turning point for Sinclair, allowing us to better serve our viewers and advertisers while creating value for our shareholders.”
“Today’s announcement is the culmination of an extensive strategic review, which has delivered significant value to our stockholders,” said Peter Kern, Tribune’s Chief Executive Officer. “Since we announced the strategic review 15 months ago, we have streamlined the business, monetized non-core assets, strengthened our balance sheet and returned more than $800 million to stockholders — all of which has resulted in a 50% increase in stockholder value. We are extremely proud to join Sinclair, and we’re excited that Tribune stockholders and employees will have the opportunity to participate in the long-term growth of the combined company.”
The transaction has been unanimously approved by the Boards of Directors of both companies and is anticipated to close and fund in the fourth quarter of 2017. Completion of the transaction is subject to approval by Tribune’s stockholders, as well as customary closing conditions, including approval by the Federal Communications Commission (“FCC”), and antitrust clearance.
Sinclair expects to fund the purchase price at closing through a combination of cash on hand, fully committed debt financing to be provided by JPMorgan Chase Bank, N.A., Royal Bank of Canada, Deutsche Bank AG New York Branch and Deutsche Bank Securities Inc. and by accessing the capital markets.
In order to comply with FCC ownership requirements and antitrust regulations, Sinclair may sell certain stations in markets where it currently owns stations. Such divestitures will be determined through the regulatory approval process.
Including the Tribune acquisition (before any related divestitures), all previously announced pending transactions, and pro forma for expected synergies, Sinclair’s 2015 and 2016 media revenues would have been $4.070 billion and $4.603 billion, respectively. The $6.6 billion enterprise value represents an average pro forma EBITDA multiple of less than 7.0x on the core television and entertainment business and is expected to add over 40% pro forma 2016/2017 free cash flow per share accretion .