Broadcast Executives Discuss M&A Strategy Amid Wave of Deals
With more than $1 billion of TV station asset deals announced recently (CD July 20 p8), one question was top of mind for stock analysts who cover the publicly-traded broadcasters reporting earnings last week: Why didn’t their companies buy any of the stations? Answers varied a bit. Executives in general said the outlets sold by Newport TV were packaged in batches of stations that didn’t fit with their portfolios or were more attractive to other buyers. Newport, backed by Providence Equity Partners, bought Clear Channel’s TV station group in 2008, and it’s now selling those properties.
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"There was a lot of packaging that went on with some very attractive stations and some that at least to us were not as attractive,” Meredith Corp. Chairman Stephen Lacy said during the company’s earnings teleconference Thursday. “We got into a position where we were not prepared to package up additional stations the way some other groups might have been."
Belo Corp. CEO Dunia Shive had a similar analysis. That company also sat out the recent flurry of deals involving Newport TV. The packaging of stations was a major factor that kept Belo out, she said. “There were several stations for sale in that deal, and obviously different companies had different interests in different markets,” Shive said Friday during Belo’s earnings call. “Different buyers have different synergies they can achieve, which affects what they can pay."
Companies are buying more stations because scale provides benefits, but buyers are being very strategic about acquisitions, said Steve Smith, CEO of Journal Communications. “Synergies, obvious expense reductions opportunities, acquisition of talent, duoplies -- every deal seems to be different,” he said. “We just need to continue to do our work.” Among the benefits of larger scale are increased leverage in negotiations with programming suppliers, distributors and other vendors, Shive said.
All the executives said they're in the market for more stations if the deals are right. “We have a bias toward television [assets] and a bias toward mid-sized [market] television stations as opposed to smaller” markets, Journal Communications Chief Financial Officer Andre Fernandez said. In radio, the company is interested in adding stations in markets where it already has clusters, he said. Journal has 35 radio and 13 TV stations (http://xrl.us/bnieop), while Belo has 20 TV stations (http://xrl.us/bnieor) and Meredith owns 12 (http://xrl.us/bnieot).
Opportunities to buy more stations continue to come up, Smith and others said. “We are definitely in the deal flow, and in a couple of instances we have spent a lot of time analyzing specific transactions,” said Shive. The good news is the deals reflect a strong valuation for stations, she said. “I'd say the ... multiple certainly speaks positively to the belief in value of the television business long term.”
Meredith will continue looking for mid- to major-market network affiliated stations to buy, said Lacy. “If the opportunity comes up where it matches what we're trying to get, that’s great,” he said. “But we don’t feel that we have to take on stations that don’t fit our portfolio."
Another Newport TV station sold, the buyer said Friday. Shield Media said it agreed to buy the Fox-affiliated WXXA-TV Albany, N.Y., for $19.5 million. Shield is owned by White Knight Broadcasting Vice President Sheldon Galloway. The deal marked its first acquisition and it’s “actively pursuing other opportunities,” it said in a news release (http://xrl.us/bnieo9).