Sinclair ready to swap or sell

Nov 12, 2001  •  Post A Comment

Sinclair Broadcast Group President and Chief Executive David Smith says he is prepared to swap or sell TV stations to take advantage of future deregulation.
In a third-quarter earnings conference call with analysts, Mr. Smith said, “When deregulation happens, there is going to be significant merger and acquisition activity. We expect there will be a number of players that have specific interests in assets other people have.”
The “horse trading” will be aimed at achieving more “operating efficiencies of scale on a market-by-market basis,” Mr. Smith added.
Sinclair recently hired Bear Stearns to advise what to do with its portfolio of 63 television stations in 40 markets in anticipation of broadcast deregulation in 2002. It is exploring swaps and sales within its groups of ABC-, NBC- and CBS-affiliated stations to focus on middle-market duopoly markets and to ease balance sheet pressures.
“The company may be looking to exit certain top-25 markets, or those markets most coveted by the network-owned station groups, where it is unlikely to acquire duopolies,” said Merrill Lynch analyst Jessica Reif Cohen.
Sinclair also said it will continue to institute station “outsourcing,” as it did recently at its Tallahassee, Fla., station, under which Sinclair manages a second station by providing certain sales, operational and managerial services.
Mr. Smith said Sinclair will retain stations as long as they can be organized in groups where back-office and other cost synergies can be achieved that enhance financial performance but do not compromise content.
NBC, CBS, ABC and Fox have expressed active interest in buying stations to create duopolies. “We happen to be in the fortunate position of having one of the largest single TV station asset groups that if-and when-placed in the right hands, where they can be better maximized, create huge leverage for those companies and those marketplaces,” Mr. Smith said.
Sinclair reported a 27 percent decline in third-quarter broadcast cash flow from continuing operations to $58.4 million on a 12 percent decline in net broadcast revenues to $153 million.
Local advertising revenues declined 7.5 percent in the period, excluding political revenues, while national advertising revenues were down 17 percent.
The company revised its full-year outlook, saying broadcast cash flow would decline 27.5 percent on a 13 percent drop in net broadcast revenues.