Sinclair sells two stations

Apr 22, 2002  •  Post A Comment

Sinclair Broadcast Group’s announced sale of two Indiana TV stations to Tribune Co. for $125 million cash is part of the company’s ongoing effort to divest nonstrategic stations, but hardly the start of an industrywide station sales binge, experts say.
The big obstacle to TV station deals continues to be the yawning gap between the expectations of sellers, who bought stations at record high prices two years ago, and those of buyers, who are insisting on more reasonable multiples of depressed cash flow due to the recent advertising slump.
The sale of Sinclair’s WTTK-TV in Kokomo, Ind., and WTTV-TV in Indianapolis represents a 38 times multiple of 2001 broadcast cash flow and an estimated 21 times multiple of estimated 2002 broadcast cash flow, the company said. Sinclair has been working for months with investment bankers to sell more than a dozen of its 61 TV stations in 39 markets.
Clear Channel is another broadcaster looking to sell off nonstrategic assets, which include the Ackerley TV stations it recently acquired and a profitable outdoor business. Industry sources say Clear Channel is seeking about $300 million for the mostly middle-market stations.
There has been speculation that Clear Channel may seek a partnership or outright merger with the likes of NBC. Well-placed sources say there have been partnership discussions between the companies.
Clear Channel also is selling several dozen of its smaller radio stations. The San Antonio-based company owns 1,170 radio stations that generate an estimated 17 percent of total industry revenues.
Last week, Emmis Communications President and CEO Jeff Smulyan reaffirmed to investors plans to spin off the company’s recently acquired TV stations from its radio business within the next year.
Although it has been successful in reducing some of its $1.5 billion in outstanding debt with assets and equity, Emmis had lukewarm reception from companies potentially interested in buying or partnering in its TV stations because they don’t want to cover Emmis’ original $1.2 billion cost on the properties, analysts say. The television stations, most of which Emmis acquired from Lee Enterprises, are valued at about $600 million, again reflecting more recent depressed cash flow.
“TV station valuations are up. We see some upside in our television group, which outperformed everything else last quarter,” Mr. Smulyan said last week in a fiscal fourth-quarter conference call with analysts. Emmis is revamping its 15 midsized to larger TV stations by strengthening its sales and other operations.
Emmis beat analyst estimates with $30.6 million in fourth-quarter media cash flow on declining revenues of $117 million and $25.2 million in earnings. Even after a spinoff, he said, Emmis would remain a buyer of larger-market TV and radio stations.
Mr. Smulyan said the company is talking to potential broadcast or financial partners who could help support a spinoff, and is committed to “resolving this issue in this fiscal year.”
Broadcasters, who are cautiously optimistic about a gradually improving advertising market this year, say they are looking with great interest at LIN Television’s proposed initial public offering, slated for April 29. LIN, which would like to price its shares at between $19 and $21, will be fortunate to get $15 a share in this volatile market, industry experts say.
The IPO will be the first of its kind in years to test the stock market’s ability to price a pure-play television company at a multiple that accurately reflects its value.
The IPO is a “make it or break it” attempt by LIN to raise additional funding for acquisitions before it resorts to being sold or merged with another company to create necessary scale. Although LIN has talked to dozens of broadcast groups about partnering, analysts say Meredith Corp. and Raycom Media are among the ones that make the most sense.