NBC set to buy by the Bay

Dec 3, 2001  •  Post A Comment

NBC this week could move a step closer to owning a San Francisco television station.
The Peacock Network has intensified its separate negotiations with Young Broadcasting to buy KRON-TV and with Granite Broadcasting to buy KNTV in a bid to finally own a station in the nation’s fifth-largest TV market and to save its affiliation there from being jolted.
Although the three companies declined comment on their talks, sources close to the situation said NBC has made cash offers for each of the stations and is pressing to finalize a deal with one or both. An acquisition announcement could come this week, sources said.
In the process of playing one station off the other, NBC could wind up acquiring both stations and eventually own three TV outlets in San Francisco. NBC will own KSTS-TV, the full-power Hispanic station there, when it completes its proposed acquisition of Telemundo Communications.
As it is doing in Los Angeles, NBC would apply to the Federal Communications Commission for a waiver to own three stations in San Francisco. Sources said NBC could realize more than $30 million in initial synergy and redundancy-related savings from operating a San Francisco duopoly.
Price has been the sticking point in the discussions with Young and Granite. “It looks like whoever is willing to accept NBC’s valuation is the winner,” said a source familiar with the talks.
Young has resisted overtures by NBC the past month to pay between $400 million and $450 million for KRON, or about half the price Young paid for it less than two years ago at the top of the market. That buy-ask price gap essentially represents the money NBC would dish out to buy KNTV. It also represents the value NBC has placed on its affiliation in the San Francisco market.
NBC has offered Granite between $210 million and $240 million, plus other monetary considerations such as a breakup fee, for KNTV, a San Jose, Calif., cable-system-supported station that is set to assume KRON’s NBC affiliation on Jan. 1, 2002.
Young and Granite both are overleveraged and in need of cash infusions but have different overriding concerns.
Sources said that NBC can put the brakes on a planned NBC affiliation switch from KRON to KNTV Jan. 1 by buying both stations or by buying KRON and properly compensating Granite for the NBC affiliation.
Under one scenario, NBC could buy KRON and not close on the deal for months, but offer Granite a combination of cash and programming as compensation for not getting the NBC affiliation as planned. Granite would have to agree to waive a 90-day notice and a $15 million breakup fee called for in its existing NBC pact. NBC also would have to forgo $300 million in reverse affiliate compensation payments from KNTV that Granite agreed to but is straining to make.
Young has invested millions of dollars in content to program KRON as an independent. However, analysts estimate that in a weak advertising market, KRON would lose more ad revenues and viewers than originally expected in the NBC affiliation shift, thereby destabilizing Young’s finances.
Granite also is groaning from a limp ad market and $300 million in reverse affiliation payments to NBC. It became clear last week that companies bidding for Granite’s Detroit station are unwilling to pay more than about $100 million, well under the $160 million Granite paid several years ago.