Petry in Play

Clear Channel Communications is in talks to buy Petry Media Corp., the third-largest TV ad sales rep firm, for an estimated $150 million, according to people familiar with the transaction.

A sale would further consolidate the business of TV rep firms, which package and sell ad time for stations, and give Clear Channel more leverage to negotiate with station clients.

Currently, the Clear Channel-owned companies produce about $2.5 billion in ad sales; Petry, about $1.5 billion. The Cox-owned rep companies control about 50% of the market, or about $4 billion in annual ad sales.

For Clear Channel, which controls about 30% of the market, the addition of Petry would put the company on equal footing with Cox. It would also gain leverage in negotiating service contracts with station clients, eliminating a competitor that might offer better terms—essentially, lower commissions for sales made on behalf of stations.

If the sale is completed, the sides are still far apart on price, and talks could falter—it would certainly draw scrutiny from the Department of Justice (DOJ), which investigated a proposed sale of Petry five years ago. The DOJ demanded changes, and ultimately, the deal collapsed.

Petry and Patriarch officials did not return calls for comment. Clear Channel and DOJ officials declined to comment for this story.

One big antitrust issue: A sale would reduce the number of companies owning big independent TV representatives from three to just two, Cox Broadcasting and Clear Channel.

Clear Channel currently owns three ad sales rep units, all organized under the Katz Television Group. Cox Broadcasting owns Telerep, HRP and MMT. Petry Media operates two separate units, Petry Television and Blair Television.

Like the TV-station business, the rep business has consolidated drastically over time.

Thirty years ago, there were 27 firms serving about 650 stations. Today, three companies serve roughly 900 stations, excluding network owned-and-operated stations, all of which have in-house units that package and sell all of their ad time.

Five years ago, the Justice Department examined a similar deal that would have combined Petry with Katz Television. At the time, Clear Channel was not the parent company, but the same rep firms were involved. DOJ told Katz owner Hicks Muse Tate & Furst that it would have to sell off one of its smaller rep divisions in order to receive approval for the Petry transaction. The deal fell apart, and Hicks Muse eventually sold its media holdings, including its rep firms, to Clear Channel.

For Petry, the sale would amount to a cash-out for Patriarch Partners LLC, the venture-capital company that bought a controlling stake in Petry about a year and a half ago. Before Patriarch, Petry had accumulated hundreds of millions of dollars in debt from various sources and had defaulted on its loans, according to a former executive.

After Petry defaulted, Patriarch bought its bad loans from the banks involved at a steep discount and cleaned up the company's balance sheet. Patriarch has tried to find new revenue streams for Petry in the hope of finding a buyer, with some success. The rep firm has signed recent deals to package and sell ads for two regional sports networks.