Sinclair Launches Small-Market Station Group

$99 million for Cox quartet to launch 'Chesapeake TV'; opportunities out there in the smaller markets

Michael Malone -- Broadcasting & Cable, 2/26/2013 9:35:44 AM

Sinclair Broadcast Group has launched Chesapeake TV, a station group focused on small-market stations, including the four that Sinclair agreed to acquire from Cox Media Group (CMG) Feb. 25. The acquisition, for $99 million minus $4.3 million of working capital adjustments, comprises KFOX El Paso, WJAC Johnstown, KRXI Reno and WTOV Wheeling/Steubenville, representing a range of markets from No. 91 to No. 158.

The license assets of KAME Reno will be purchased by Deerfield Media, while Sinclair will provide the services to KAME that CMG has historically provided.

"We have prided ourselves on being a forward-looking company with a history of creating innovative ways to unlock value for our shareholders. We have established Chesapeake TV as the primary operating entity for the CMG stations and other small market stations we may acquire, while STG will continue to be our primary operating entity for mid-sized market stations," said David Smith, Sinclair Broadcast Group president and CEO. "We believe a dual operating structure is critical to the success of a small market strategy since the economics and competitive nature can differ from those of the mid-sized markets."

The Cox deal is subject to regulatory approval. 

Sinclair and Deerfield Media work closely in several markets. Deerfield agreed to acquire WUTB Baltimore from Fox Television Stations late last year; Sinclair will operate WUTB through a shared-services agreement.

"Over the past 18 months, we have led the industry's consolidation efforts in the mid-sized markets, purchasing 30 TV stations and creating over $400 million of equity value," said Smith. "We believe there are many more opportunities to acquire quality assets and to unlock hidden value, including in the smaller markets, such as where the CMG stations operate. We believe our platform size and leadership position allow us to bring meaningful purchasing power and negotiating leverage to these stations. Including synergies, we believe the CMG stations can generate approximately $20 million of cash flow, on average."