TV Station M&A to Pick Up This Year, LIN TV CEO Says
The TV station market seems poised for a wave of M&A activity in 2012, LIN TV CEO Vincent Sadusky told analysts during the company’s Q4 earnings teleconference Wednesday. But for LIN to participate in buying stations, or bolster its digital media business with further acquisitions in that sector, the prices will have to be right, he said. “I would put the degree of difficulty at ’super high,'” Sadusky said when asked what it would take for LIN to want to put its cash to use buying new assets.
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"I can’t tell you how many things we've looked at on the interactive side that have just not met our projected ROI [return on investment] requirements,” he said. And if station groups sell at high valuations that keep LIN from buying them, it will bolster arguments that LIN should be worth more itself, Sadusky said. “We look at everything and we've got a pretty active process … and we're pretty unbiased when it comes down to what we need to do in order to achieve our required returns."
And there should be plenty of assets to look at this year, Sadusky said. The debt markets have improved, the industry has rebounded significantly from its recession-induced lows of 2008 and 2009 and several station groups have either reorganized or restructured their debt, he said. “When you look around at the landscape of ownership structures of many of these groups, it feels like there’s a plan to exit at some point,” he said. That point could be 2012 if the debt markets remain healthy, the economic recovery continues and the industry’s free cash flow’s prospects hold, he said.
For owners who want to remain in the broadcasting business, scale is becoming an increasingly valued asset, he said. Beyond cost-saving efficiencies, greater scale is also proving to bring greater revenue streams, he said.
LIN’s first priority for using its cash will be to buy back shares under a $25 million share repurchase authorization it announced in November, Chief Financial Officer Rich Schmaeling said. But after completing that and paying down some debt this year, its debt-to-earnings ratio will leave it with additional cash to spend heading into 2013, he said. “When we get past this year, I think the company has a lot of flexibility and no decisions have been made yet."
Sadusky and Schmaeling said they have been happy with Comcast’s commitment to investing in its broadcast assets since taking control of NBCUniversal, both at the station level and the network. LIN owns part of some NBC stations through a joint venture with NBCU. “That may have a short-term negative impact as operating costs will go up,” Sadusky said. “But for the longer term competitiveness of these TV stations it’s the right decision,” he said. “We're optimistic, given the strategic and operating moves they've made."
Q4 sales at LIN fell 8 percent from a year earlier to $111.5 million on lower political ad spending. Profit more than doubled from a year earlier to $43 million on an income tax provision benefit.