BALTIMORE and ARLINGTON, VA. —
Sinclair is getting into the cable news business with its $985 million acquisition of the Allbritton-owned stations. The assets
comprise seven ABC-affiliated TV stations, including WJLA-TV in Washington,
D.C., as well as NewsChannel 8, a 24-hour cable/satellite news network in the
“It has yet to be fully developed outside the D.C. market,” said Sinclair chief financial officer David Amy on a conference call. On a local level, Sinclair has 100 news stations broadcasting 71 hours of local news per week. Amy said NewsChannel 8 would be integrated with those local news operations to create a new hybrid national-local model.
Sinclair CEO David Smith said a national expansion of NewsChannel 8 could be done in the next couple of years.
“We have spent no
time within the structure... We need to get in there as soon as possible and
start exploring what their physical capability is and what their talent
capability is. Just the whole notion of rolling out a cable news platform
in all Sinclair markets will require the creation of a news wheel, and how
local content is integrated into the daily schedule. It should be well up and running in a couple of
Amy later said the cost of expanding NewsChannel 8 nationally was “immaterial.”
Shares of Sinclair (NASDAQ: SBGI) popped by more than $2 Monday morning to $31
before settling down to $30.33 by mid-morning Eastern. The purchase price
represented an 8.7x multiple of average 2011-12 cash flows, including $21.5
million in operating synergies involving retransmission consent. Wells Fargo analysts led by Marci Ryvicker, said
NewsChannel 8 brought “significant value” in the deal.
“In our opinion, the above-average multiple paid for this asset has to do with
the cable news channel, and we would view this as a unusual situation rather
than a ‘new norm.’ We think that SBGI has plans to roll out the cable news network
across all of its markets—infusing local news into a national news format. This
network would be the first of its kind and likely to bring significant
synergies over time—note that the 8.7x multiple above does
include any upside from this network. We estimate there could
be ~$300 million of incremental revenue, which would drop the purchase price
multiple down to below 3x.”
The $300 million figures assumes carriage fees of around 60 cents per sub
monthly, similar to CNN. Amy reasoned that a hybrid national-local network would be worth as much if not more than CNN on the basis of local ratings.
“We think market should pay for value, not for brand,” he said. “In
another words, if a brand is not delivering an audience, why should it get
To illustrate, Amy shared some local numbers from February rating books. In Columbus, Ohio, on Feb. 13, for adults 25-54...
“From 5:30 to 6 a.m., we run paid programming. Our paid
programming on a Fox affiliate does three times the rating that Bill O’Reilly
does in prime time,” he said. “The CW does 3,000 from 4 to 7 p.m. with talk shows. Wolf
Blitzer on CNN has no measurable ratings.This isn’t specific to us. This is true of local television
all over the country.”
Sinclair chief David Smith was effusive about the cable play.
“To buy a full-blown news operation in our nation’s capital and an
infrastructure that allows us to be connected to our branches of government and
be at the pulse of national issues is a once-in-a lifetime event,” said David
Smith, president and CEO of Sinclair. “We are especially excited to acquire the
NewsChannel 8 local news channel, not only for the content it can provide our
existing news stations, but moreover because their regional cable presence
provides the perfect platform should we decide to expand it into other markets,
especially given the amount of local news we produce across our entire
The Allbritton stations purchased include:
WJLA in Washington, D.C., designated market area No. 8;
WBMA, WCFT and WJSU, all in Birmingham/Tuscaloosa/Anniston, Ala., DMA No. 42;
WHTM in Harrisburg/Lancaster/Lebanon/York, Pa., DMA No. 43;
KATV in Little Rock/Pine Bluff, Ark., No. 56;
KTUL in Tulsa, Okla., No. 59;
WSET in Roanoke/Lynchburg, Va., No. 68; and
WCIV in Charleston, S.C., No. 98.
The deal brings Sinclair’s station total to 149, reaching its reach 38 percent of U.S. TV households. Federal Communications Commission rules
cap the national reach any one owner can have at 39 percent, but it factors in
a 50 percent discount for UHF stations. Sinclair has a 22 percent U.S. TV household reach with this UHF discount. There also will be divestments
based on local ownership caps. Sinclair said it expects to sell the license and
certain related assets of its existing stations in Birmingham—MyNetwork
affiliate WABM and CW affiliate WTTO—Harrisburg—CBS affiliate WHP—and Charleston—MyNetwork
affiliate WMMP. Sinclair will retain shared services and joint-sales agreements
on these stations.
The affiliate breakdown, including the Allbritton stations, is as follows:
1 Azteca America
Sinclair anticipates that the transaction will close and fund in the fourth
quarter of 2013, subject to the satisfaction of the closing conditions. Sinclair
said it “expects to fund the purchase price at closing through a bank loan
and/or by accessing the capital markets.”
Including the Allbritton stations and all previously announced acquisitions,
pro forma for expected synergies, the Sinclair said its 2011 and 2012 net
broadcast revenues would have been $1.609 billion and $1.865 billion,
Allbritton’s owners put the TV stations up for sale in May. Sinclair was
immediately considered a contender because of its voracious acquisition spree
over the last two years. The company bought four stations belonging to Titan TV
in early June for $115 million. It took 20 Fisher TV stations in April for
$373.3 million. Other purchases include Barrington stations for $370 million,
$99 million for four Cox stations, $412.5 million for six Newport TV stations,
$385 million for the Freedom Broadcasting stations and $200 million for TV
stations amassed by Four Points. (
Spree Dazzles Street, Puzzles Stations.
Sinclair also purchased transmission antenna vendor Dielectric in June for
around $5 million.
June 4, 2013,
to Buy Four Titan Stations for $115.35 Million
also will assume TTBG sales and service agreements for to two other stations.
The TTBG stations are located in three markets and reach 1 percent of U.S. TV
May 1, 2013,
Launches Sale Balloon
Communications put itself out there today, announcing its “intention to explore
and evaluate potential strategic alternatives, which may result in, among other
things, the possible sale.”