A Billion Dollar Station Deal!?!


Suddenly the station market is looking mighty crowded.

Nexstar of course revealed its desire to “explore and evaluate strategic alternatives” for the group yesterday, which the Wall Street Journal says could go for as much as a billion. (With Nexstar’s well-publicized affiliation issues with Fox, it doesn’t feel like the group is operating from a position of strength right now, if you ask me.)

Nexstar’s stock price spiked on the news yesterday, jumping from $7.40 Wednesday to close to $10, and is hovering around $9.35 now.

The Nexstar stations join those owned by Freedom and McGraw-Hill (and, by some accounts, Young Broadcasting, which seem like they’ve never not been for sale) on the block.

It’s hard to imagine someone spending a billion on a station group again, or even someone buying an entire group outright, as opposed to a series of buyers peeling off the pieces they like.

Coady Diemar Partners’ “Media Maven” report has an interesting historic look at station M&A back in 2007, when there were actually big station deals, and the trade reporters following this stuff had some fun stuff to write.

Our analysis of TV station deals in 2007 shows that there were eight transactions whose purchase price exceeded $100 million. These eight deals represented over $4 billion in TV station transactions covering 26 TV stations and included private equity sponsors such as Providence Equity Partners, Oak Hill Capital, Cerberus and HBK Capital. For the five transactions for which we have data, cash flow multiples were in the 12x-15x range, buoyed by a very favorable lending market. 

There were two billion dollar deals in 2007: Newport Television bought the 41 Clear Channel stations for $1.1 bil, while Local TV acquired eight Fox O&Os for $1.1 as well. As Coady Diemar notes, both groups were backed by private equity: Providence Equity Partners and Oak Hill Capital, respectively.

Local TV’s deal was on the heels of another major 2007 acquisition: nine NY Times stations for $575 million.

Billion dollar station deals? Private equity buying groups? A 15x multiple? The New York Times Co. owning TV stations?

It feels like another lifetime.

I feel like I’ve written a dozen stories about how station M&A will finally pick up in 2011, quoting smart people who follow this stuff who say it just takes one deal to set the benchmark and unclog the pipeline.

But it still feels like there’s a wide gap between what stations owners and would-be buyers think local TV outlets are worth.

Writes Coady Diemar:

While local TV owners have proven adept at developing several new revenues streams, secular issues such as reverse compensation and voluntary spectrum auctions have created some uncertainty in the marketplace. This will likely have the effect of private equity remaining hesitant and prevent the local TV M&A marketplace from returning to previous levels.