Station Valuations Return to ‘Reality,’ Drawing in Sinclair
Sinclair Broadcast Group is buying TV stations again, now that valuations have returned to “reality,” CEO David Smith said Wednesday. “We sat on the sidelines for I don’t know how many years, while a lot of other folks out there were paying whatever they were paying for businesses,” he said during the company’s Q3 earnings call. “Our view was, we'll sit back and wait and they'll come back to reality. We think they're kind of in that neighborhood now and that’s why we're taking advantage of them."
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Sinclair agreed to buy Freedom Communications’ eight TV stations Wednesday for $385 million. The price reflects a 6.6 multiple of the station groups’ projected earnings for 2012 and 2013, said Sinclair Chief Financial Officer David Amy. “Originally, we were not interested in these assets, given prior valuations,” he said. “However, Freedom approached us because we had no regulatory conflicts.” The purchase, along with Sinclair’s acquisition of Four Points Media’s TV stations, will give it a duopoly in West Palm Beach, Fla., he said.
Sinclair said it plans to operate the stations under a local marketing agreement after getting antitrust clearance for the deal but while awaiting FCC approval for the license transfers. The deal also requires Freedom to re-obtain a failing station waiver from the FCC to transfer WCWN-TV Albany, N.Y., Amy said. “We have no reason to believe the waiver will not be granted."
Sinclair will keep looking for deals on broadcast assets, Smith said. “If the numbers fit the profile and it kind of meets our other tests, we've got to be a buyer of it,” he said. “That’s kind of what we've always done.” The Freedom stations should generate enough free cash flow that the company will quickly be back to its target leverage after the deal closes, giving the capacity to finance more transactions, he said: “If there’s anything out there that meets our criteria, we then we're certainly opportunistic about it."
Sinclair is trying to talk to elected officials in border states about the risks to their local TV service involved with auctioning some of the TV band spectrum, Smith said. “I can’t imagine congressmen and senators, let alone state politicians from any state along the northern or southern border, have any interest in local TV stations ceasing to exist, given that’s how they communicate with the public on a daily basis,” he said. “Local broadcasters have a responsibility to let their representatives know what the reality is and I think it’s just getting started right now."
Q3 TV sales at Sinclair fell 4.5 percent from a year earlier to $151.7 million, the company said. Profit gained 34 percent from a year earlier to $19.2 million on lower interest expenses and a gain on some equity investments. Shares gained 19 percent Wednesday.