Record Consolidation: Another $5 Billion to Go?

We are only at the halfway point, some industry veterans say, of an unparalleled period of M&A for local TV

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The Rise of the Station Super-Groups

Local television has seen approximately
$3 billion worth of stations
slated to move to new owners
this month alone, and industry pundits
suggest there may be as much as $5 billion
worth still to shift. After a year-plus of Sinclair
and Nexstar gobbling up small- and
midsize-market stations, recent blockbuster
deals—the Media General-Young Broadcasting
merger and Gannett’s pact to acquire
Belo—have moved into larger markets and
set the stage for more big-ticket deals.

It is “the end of the beginning,” according
to John Tupper, owner of station
brokerage firm Kepper, Tupper & Co., as
the global banks step in after the regional
ones made a killing providing capital for
the smaller acquisitions. “There’s a lot of pent-up sellers interested,”
Tupper says. “There’s not been a liquidity market
for their assets in a while.”

For some station owners at a certain stage of life, flush
with recent election-spending cash and thoughts turning to
estate planning, Tupper says the time might be right to sell.

Larger groups, including Allbritton and Local TV, represent
rare opportunities to own quality stations in top 25
markets, and could by themselves approach that estimated
$5 billion ceiling. Some observers suspect Gray Television
may be next to sell. Multiple sources think Fox may be a
buyer again in major markets.

New View of Value

Either way, it’s an unparalleled flurry of activity in local TV.
“The financial markets have taken the new view, rightly so,
of the value of broadcast stations and their future value,” says
Gannett Broadcasting president Dave Lougee.

According to Robin Flynn, senior analyst
at SNL Kagan, it is the “early to middle
stage” of the consolidation process. Adding
to Gannett’s $2.2 billion agreement to
acquire Belo (which includes $715 million
of existing debt) is Young’s estimated value
of $600-$800 million, she says. That leaves
another $5 billion-plus to potentially move.

“I think, and I’m not alone in my thinking,
there’s a lot more to come,” Flynn
says. “The rationale for consolidation is so
strong. [The deals are] coming with such
regularity and such speed.”

Others think the wave may have crested,
though most acknowledge that as the recent
two front-page deals were surprises,
the future is anything but clear. It may be the “middle to
end point” of consolidation, says Mark Fratrik, VP and chief
economist at BIA /Kelsey. “I don’t think there will be anything
big,” he says. “But I was surprised by Gannett and
Belo, and I guess that could happen again.”

Buy or Sell?

If they are not buyers, broadcasters have to at least consider
being sellers. For his part, Paul McTear, Raycom Media
president and CEO, is considering all options. He says he
doesn’t have a clue as to when the consolidation will end,
but suggests it may be sooner rather than later. “If it continues,
I’d be just as surprised as I was with Belo,” McTear says.
“There are just not that many broadcasters left.”

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