Liberty exits insurance will bank on TV, digital

Buys Civic Communications for $204 million
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Hoping to ensure its future, Liberty Corp. is getting out of the insurance business to concentrate on TV-station ownership and digital ventures.

Liberty's Cosmos Broadcasting last week agreed to merge with Civic Communications. Civic brings three TV stations to the deal-wlbt(tv) Jackson, Miss.; KLTV(TV) Tyler, Texas; and satellite KTRE(TV) Lufkin/Tyler-increasing Cosmos' holdings to 15 Big Three affiliates.

Despite the TV industry's "poor growth outlook," as media analyst Paul Sweeney of Credit Suisse First Boston Corp. put it last week, Cosmos President Jim Keelor says Civic is a "conservative and entrepreneurial" buy. What analysts are not seeing, he adds, is the growth that will come with the convergence of broadcast stations and the Internet, as well as the opportunities to be provided by digital television.

Cosmos paid $204 million cash for the three TVs, which, when the deal closes by the end of the year, will work out to less than 13 times cash flow, according to Keelor.

Wall Street celebrated by boosting Liberty's stock price by nearly 14% last Monday, to $43.4375. But investors may have been more pleased by the company's insurance sell-off. Liberty got $650 million for its insurance business, erasing its debt in the process. The stock price of acquirer Royal Bank of Canada also rose at the news.

Cosmos will probably start buying more TV stations in three to six months after this deal is digested. Another merger is possible if Liberty can be the controlling shareholder, Keelor says. The company has an acquisition war chest of about $600 million.

However, "this money that we have now and our new stations [are] not burning a hole in our pockets," Keelor notes. "You've got to be careful about what you're looking for in a market like this," where station prices have been driven up by duopoly.

Another factor affecting station prices is network actions to reverse the practice of paying affiliates for airing network programming. ABC and NBC have stated policies to do so; wlbt is affiliated with NBC, while kltv and ktre are ABC affiliates.

ABC in particular is insisting on renegotiating affiliation contracts when a station is sold. However, Keelor says, any increased costs, if that happens, have to be borne by Civic under the terms of the sales contract.

Cosmos will look to buy stations in markets where it can build duopolies, and in markets and/or with stations that show growth potential, according to Keelor. Its TV stations currently are concentrated in the South in markets ranging from Louisville, Ky. (Nielsen market No. 48), to Jonesboro, Ark. (No. 178).

Meanwhile, Cosmos is beefing up the Internet and e-commerce capabilities of its currently owned stations. Liberty is not new to digital; it already has partners in Internet company WorldNow and broadcast consortium iBlast.

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