Station trading heats up

For the past 18 months or so, it has been hard to find much of a pulse in the TV-station–trading market. Now, however, there are some indications that sales activity is picking up a little bit—but has a long way to go to reach the levels of the mid to late 1990s, when station-trading volume was at its peak.

In the first eight months of '02, BIA reports, 75 TV stations sold for a little more than $2 billion, up just slightly from the 70 stations that sold for $1.95 billion in the same period a year ago. But that's nowhere near the high-water mark of the past five years, which was the $14.1 billion that 144 TV stations fetched in 1999.

BIA Vice President Mark Fratrik predicts that, by year's end, TV-station-sale activity "should be noticeably better than in '01."

Some investors believe that the TV business is at or near the bottom of a two-year rough patch and now's the time to buy.

Arlington Capital Partners, a Washington, D.C.-based private equity firm, is one of them. "It's impossible to predict exactly, but we think the TV broadcast industry is near the bottom of the down ad cycle, so we think we're hitting it at a good time," says Managing Director Perry Steiner. His firm has committed $75 million in equity to support the efforts of a start-up broadcaster called the New Vision Group. It has bought two stations so far.

Clearly, there are buyers and sellers looking for deals, and more discussions and even negotiations are going on now than in the past 18 months. "There's been more activity in last two months than in the previous 12," says Ellicott City, Md.-based station broker Larry Patrick.

He has seven TV deals in the works, ranging in value from $30 million to $60 million in medium-size markets.

"Six months ago, even a year ago, we didn't have anything to talk about, and now we have seven stations," he says. "It's more than a trickle but not yet a full stream."

The biggest transaction of the year so far has been the sale of Benedek Broadcasting to Gray Communications Systems for $500 million. It was brought about by Benedek's financial problems.

The biggest group believed to be on the block now is Lafayette, La.-based Communications Corp. of America, which owns 10 stations mostly in the Southwest. Like many groups, CCA has been struggling through the recession, and owner Thomas Galloway has decided he wants out. But so far no takers. Analysts estimate the entire group might go for between $400 million and $500 million.

One of the problems with the current market is that sellers are looking for prices that buyers don't want to pay. "There are a lot of sellers," says station broker Bruce Fox, "but they still have unrealistic expectations."

Case in point, others say, is Granite Broadcasting's WB station in Detroit. According to brokers, the company wants $80 million or $90 million for it. "They'll never get it," says one broker, arguing that the station is worth significantly less.

Fisher Broadcasting, based in Seattle, also reportedly has two Fox affiliates in Georgia up for sale. Word is that the company, which insists it won't sell the whole group, was close to a deal recently but it fell through.

Jim Keelor, president of Liberty Corp.'s Cosmos Broadcasting, talked to a lot of potential sellers over the past year but has come up empty-handed. "We've done a lot of looking, but the bid-ask spread is still too wide," he says of marketplace prices. "I think everybody is kind of holding their breath for deregulation to see if we can get something out of the FCC that allows the industry to consolidate and become more efficient."

Emmis Communications is also looking. "We're talking, but there's nothing close," says CEO Jeff Smulyan. "We're talking to a lot of people, but nothing is imminent."

As the economy and station regulations changed, so did the number of TV stations sold, their value and their availability. Take a look at the fluctuations since 1995: