With the right set of synergies baked into the deal, the Local TV LLC stations could sell for as much as $2.7 billion, according to a new report from Wells Fargo Securities. That would represent a 12 X multiple, while the bottom end of the forecast, a 7 X multiple, would spell a $1.6 billion deal.
With a 9-10 X multiple typical of current transactions, that would set the value for Local TV's stations -- which include KDVR Denver and WTKR Norfolk -- between $2.04 billion and $2.26 billion.
Final bids for the group, which has 19 stations, were due June 20.
The report, authored by J. Davis Hebert, also breaks down the other major group on the block in Allbritton. For a buyer with blended 11 X multiple, it can command a $1.09 billion price tag, with WJLA Washington alone valued at $586 million. At the other end of the multiple spectrum, Wells Fargo Securities sets a $595 million value for a buyer with a blended 6 X multiple.
Wells says there's been $6.5 billion in station deal volume since Sinclair got it rolling in September 2011, "and we think there is more to come."
Wells Fargo Securities offers reasons why so much consolidation has been going down: "Increased size and scale for more favorable retransmission contracts and affiliation agreements; diversification for groups that may have been more concentrated by affiliate or diversified media companies with newspaper risk; immediate contractual synergies, primarily driven by retrans step-ups; spectrum that provides long-term strategic value; and attractive cost of capital available, combined with more comfortably leveraged balance sheets."
The banking firm says the torrid M&A may go on for another couple years. "When the dust settles (perhaps over the next two years), Sinclair has said it expects there could be 5-7 players left, all of which would have significant industry scale," says the report.