The Top 25 M&A Forecast

TV station business has cooled, but there are warm spots
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The climate is cooling for TV station mergers and acquisitions, as recession fears linger and the credit crunch makes financing more costly and difficult to obtain.

But there are some warm spots: Election-year advertising is proving solid, and M&A deals still get done. The $1.1 billion sale of eight Fox O&Os to an affiliate of private equity firm Oak Hill Capital Partners changed the landscape. It pushed Fox from first to third in B&C’s ranking of the Top 25, and made Oak Hill’s Local TV LLC a new member of the Top 25. Lincoln Financial received $583 million in the disposal of three stations to Raycom Media in November, and helped take Raycom from 17th to 15th on the list.

“Stations will sell if they are priced correctly,” says Frank Kalil, president of Kalil & Co., a major TV stations sales broker. “The chickens are running around crying that the sky is falling, but it’s not true.”

These days, the TV station sales market is divided into haves and have-nots. M&A execs say that TV stations with strong local news are still desirable because it’s expected they’ll negotiate improved retransmission fees from cable operators. Such gains flow straight to the bottom line because there’s little associated expense.

SMALL MARKETS, BIG MULTIPLES

Also, SNL Kagan indicates TV stations in metro markets No. 76 and under are fetching good prices. Such small-market stations sold in 2007 at an average of a 12.5 multiple of cash flow, which is near a recent high, and SNL Kagan now groups small-station sales near the multiples for bigger-market stations, after lagging in recent years. Audiences are less plugged into the Internet in rural America, making them more dependent on traditional media in small cities, and small-market stations often are not aggressively managed by sellers, so buyers expect more upside.

But recession fears and tight credit make financing more difficult to obtain and more costly. “Prior to five months ago, it was a strong though not overwhelming market for TV stations,” observes Mark Fratrik, VP at BIA Financial Network. “Until this credit cycle ends—and I don’t see that in 2008—I don’t see a strong market returning.”

With higher financing costs, buyers ratchet down their estimates of what stations will earn in future years. That lowers prices they will pay. “If the macro environment improves next year, it’ll result in a better pricing environment for sellers,” says Robin Flynn, senior analyst at SNL Kagan. That’s not a pipe dream. Many analysts think things will improve in the second half of the year as the Fed floods the financial sector with cheap money.

KRON: STILL ON THE BLOCK

In the meantime, the inventory of TV stations for sale piles up or properties are withdrawn. A major-market TV station languishing for a buyer is Young Broadcasting’s KRON San Francisco.

Smaller stations not affiliated with a Big Four network are perhaps the weakest segment. Spanish-language broadcaster Equity Media Holdings announced the sale of five small stations April 4 for $8 million, days after alerting its stockholders that it faced a cash crunch. M&A executives expect more forced sales of small stations. Also, some new broadcasting private equity investors “are just panicked now” and could flood the auction block, said Larry Patrick, media broker at Patrick Communications, speaking at a recent SNL Kagan conference.

Sellers often hope deregulation will help them. In December, an FCC rulemaking loosened the newspaper-broadcast cross-ownership ban, but the FCC did not change rules that would allow TV duopolies in smaller markets, which disappointed many broadcasters. And cross-ownership change is in doubt because opponents immediately filed suit.

Still, with stations holding on to advertising dollars in the fragmenting media landscape, one broker figures TV stations should always find buyers despite any economic gyrations. Says Kalil, “When TV stations don’t sell, it’s because of an unrealistic price by the seller and an inept sales effort.”

How They Were Ranked

The Top 25 Station Groups in B&C's annual list are ranked according to the percentage of U.S. TV homes they reach. This potential audience reach is calculated in two ways: by total coverage and by FCC rules. Total coverage assumes the station reaches everyone in the Designated Market Area (DMA). The FCC, meanwhile, discounts by half the reach of UHF stations, those using channels 14 and above. B&C ranks groups according to the FCC method but also shows total coverage, an increasingly important measurement in a TV landscape where the vast majority of homes get their broadcast programming via a cable, satellite or telco multichannel provider. If a group owns more than one station in the market, the additional coverage is not counted.

BIA Financial Network provides the baseline data for this ranking, with a listing of each group's stations, the affiliate status of those stations and their channels. The station listing includes BIA data for deals announced before March 10; subsequently announced transactions are noted where possible.

Each group's list includes wholly owned stations and those run under local marketing agreements and joint sales agreements. Digital stations, low-power stations, satellite stations, translators, and stations with only cable distribution are also left out because their coverage is duplicative.

Only groups that own three or more stations are included. That means WRNN License Company LLC, which owns WRNN in the New York DMA and WTVE in the Philadelphia market, is excluded. The company's stations, which cover 7.86% of all TV-homes coverage under FCC rules and a total coverage of 9.16%, would have otherwise ranked No. 18.

The rankings also assume that all currently announced deals are completed. As a result, the acquisition of the eight Fox stations by Oak Hill Capital Partners that was announced in December is included in coverage figures for Local TV LLC even though the deal is not expected to close until the third quarter of 2008.

This year's rankings include two new companies. Thanks to the Fox deal, Local TV jumps onto the ranking as the 14th largest station group (and Fox falls from first to third). Multicultural Television Broadcasting, which acquired six stations from E.W. Scripps last year, is ranked for the first time at No. 16.

Two others fell out of the rankings. The sale of the Clear Channel stations to Newport Television was finally completed in March, bumping Clear Channel off the list.

However, Newport Television is selling a number of stations or has put them into a trust, and its remaining stations do not have enough coverage to make the list. Gray Television, which was ranked No. 24 last year, also drops off the rankings.

The data for the rankings and listings was compiled from BIA data and company sources by George Winslow during late March.

1. CBS Corp. CBS, CBS A

35.65% coverage (FCC)
27 stations
38.64% coverage (total)
CBS Corp.
51 W. 52nd St.
New York, NY 10019
Phone: 212-975-4321
Website: cbslocal.com; www.cbscorporation.com
SUMNER M. REDSTONE, chairman
LESLIE MOONVES, president/CEO
TOM KANE, president/CEO, CBS Television Stations

2. ION Media Networks Private

(CIG has 100% of voting stock and control of ION Media Networks)
31.86% coverage (FCC)
53 stations
63.07% coverage (total)
601 Clearwater Park Rd.
West Palm Beach, FL 33401
Phone: 561-659-4122
Fax: 561-659-4252
Website: www.ionmedia.tv
BRANDON BURGESS, chairman/CEO, ION Media Networks

3. Fox Television Stations NWS

(subsidiary of News Corp. Ltd.)
31.36% coverage (FCC)
27 stations
37.34% coverage (total)
1211 Avenue of the Americas, 21st Floor
New York, NY 10036
Phone: 212-301-5400
Website: www.newscorp.com
K. RUPERT MURDOCH, chairman, News Corp.
ROGER AILES, chairman/CEO, Fox News; chairman, Fox Television Stations; chairman, Twentieth Television
JACK ABERNETHY, CEO, Fox Television Stations
DENNIS SWANSON, president, Fox Television Station Operations

4. NBC Universal GE

(subsidiary of 80% owner General Electric; 20% owned by Vivendi Universal)
30.41% coverage (FCC)
25 stations
35.86% coverage (total)
30 Rockefeller Plaza
New York, NY 10112
Phone: 212-664-4444
Fax: 212-664-4085
Website: www.nbc.com
JEFFREY IMMELT, chairman/CEO, GE
BOB WRIGHT, vice chairman, General Electric
JEFF ZUCKER, president/CEO, NBC Universal
JOHN WALLACE, president, NBC Owned & Operated Television Stations

5. Tribune Co. Private

(Tribune Employee Stock Ownership Plan owns 100%; EGI-TRB, an entity run by Sam Zell, invested $315 million in the $8.2 billion buyout, which closed on Dec. 20, 2007, and has a warrant allowing Zell to purchase 40% of the company's common equity)
27.53% coverage (FCC)
23 stations
35.48% coverage (total)
435 N. Michigan Ave.
Chicago, IL 60611
Phone: 312-222-3333
Fax: 312-329-0611
Website: www.tribune.com
SAM ZELL, chairman/CEO, Tribune Co.
RANDY MICHAELS, executive VP, Tribune Co.; CEO, Tribune Interactive and Broadcasting
GERALD SPECTOR, executive VP/chief administrative officer, Tribune Co.
ED WILSON, president, Tribune Broadcasting

6. ABC TV Stations Group DIS

(subsidiary of Walt Disney Co.)
23.17% coverage (FCC)
10 stations
23.42% coverage (total)
77 W. 66th St.
New York, NY 10023
Phone: 212-456-7777
Website: www.abc.com
ROBERT IGER, president/CEO, Disney
WALTER LISS, president, ABC Owned Television Stations

7. Univision

(owned by an investor group including Madison Dearborn Partners, Providence Equity Partners, Saban Capital Group, Thomas H. Lee Partners and TPG)
22.97% coverage (FCC)
37 stations
43.96% coverage (total)
605 Third Ave.
New York, NY 10158
Phone: 212-455-5200
Website: www.univision.net
JOE UVA, CEO
RAY RODRIGUEZ, president/COO

8. Trinity Broadcasting Network Private

17.89% coverage (FCC)
24 stations
35.19% coverage (total)
2442 Michelle Drive
Tustin, CA 92780
Phone: 714-832-2950
Fax: 714-665-2191
Website: www.tbn.org
PAUL F. CROUCH, president
PAUL F. CROUCH Jr., chief of staff
RUTH BROWN, CFO

9. Gannett Broadcasting GCI

16.44% coverage (FCC)
21 stations
16.61% coverage (total)
7950 Jones Branch Drive
McLean, VA 22107
Phone: 703-854-6000
Fax: 703-854-2002
Website: www.gannett.com
CRAIG A. DUBOW, chairman/president/CEO, Gannett Co. Inc.
DAVID LOUGEE, president, Gannett Broadcasting

10. Hearst-Argyle Television Inc. HTV

(75.8% owned by privately held Hearst Corp.)
15.28% coverage (FCC)
27 stations
15.85% coverage (total)
888 Seventh Ave.
New York, NY 10106
Phone: 212-887-6800
Fax: 212-887-6875
Website: www.hearstargyle.com
VICTOR GANZI, president/CEO, Hearst Corp.; chairman, Hearst-Argyle Television
DAVID BARRETT, president/CEO, Hearst-Argyle Television

11. Belo Corp. BLC

13.47% coverage (FCC)
21 stations
14.24% coverage (total)
400 S. Record St.
Dallas, TX 75202-4841
Phone: 214-977-6606
Fax: 214-977-6603
Website: www.belo.com
ROBERT W. DECHERD, chairman
DUNIA SHIVE, president, CEO
PETER DIAZ, executive VP, television operations

12. Sinclair Broadcast Group SBGI

12.34% coverage (FCC)
55 stations
21.60% coverage (total)
10706 Beaver Dam Rd.
Hunt Valley, MD 21030
Phone: 410-568-1500
Fax: 410-568-1533
Website: www.sbgi.net
DAVID D. SMITH, president/CEO
STEVEN M. MARKS, COO, television

13. Cox Enterprises Private

10.24% coverage (FCC)
15 stations
10.37% coverage (total)
6205 Peachtree Dunwoody Rd.
Atlanta, GA 30328
Phone: 678-645-0000
Fax: 678-678-0079
Website: www.coxenterprises.com
JAMES C. KENNEDY, chairman/CEO, Cox Enterprises
JIMMY W. HAYES, president/COO, Cox Enterprises
PATRICK J. ESSER, president, Cox Communications
ANDREW S. FISHER, president, Cox Television
BRUCE R. BAKER, executive VP, Cox Television

14. Local TV LLC Private

(owned by Oak Hill Capital Partners, management and a consortium of bankers and high-yield lenders)
9.92% coverage (FCC)
17 stations
11.00% coverage (total)
1717 Dixie Highway, Suite 650
Fort Wright, KY 41011
859-331-9100
Website: www.localtvllc.com
BOBBY LAWRENCE, CEO
PAM TAYLOR, CFO
LOU KIRCHEN, regional VP
DALE R. WOODS, regional VP

15. Raycom Private

9.38% coverage (FCC)
35 stations
11.45% coverage (total)
RSA Tower, 20th Floor
201 Monroe St.
Montgomery, AL 36104
Phone: (334) 206-1400
Fax: (334) 206-1555
Website: www.raycommedia.com
PAUL McTEAR, president/CEO
WAYNE DAUGHERTY, executive VP/COO
MARTY EDELMAN, LEON LONG, JEFF ROSSER, VPs, television

16. Multicultural Television Broadcasting Private

9.05% coverage (FCC)
6 stations
18.11% coverage (total)
449 Broadway
New York, NY 10013
212-966-1059
Website: www.mrbi.net
SEAN KIM, COO, CFO

17. E.W. Scripps Co. SSP

7.99% coverage (FCC)
10 stations
9.99% coverage (total)
312 Walnut St.
Scripps Center 2800
Cincinnati, OH 45202
Phone: 513-977-3000
Fax: 513-977-3721
Website: scripps.com
WILLIAM R. BURLEIGH, chairman
KENNETH W. LOWE, president/CEO
WILLIAM B. PETERSON, senior VP, Television Station Group

18. Meredith Corp. MDP

7.63% coverage (FCC)
11 stations
9.03% coverage (total)
1716 Locust St.
Des Moines, IA 50309
Phone: 515-284-3000
Fax: 515-284-2393
Website: www.meredith.com
WILLIAM T. KERR, chairman, Meredith Corp.
STEPHEN M. LACY, president/CEO
PAUL KARPOWICZ, president, Meredith Broadcasting Group

19. Media General MEG

7.55% coverage (FCC)
20 stations
7.89% coverage (total)
333 E. Franklin St.
Richmond, VA 23219
Phone: 804-649-6000
Fax: 804-775-4603
Website: www.mediageneral.com
J. STEWART BRYAN III, chairman, Media General Inc.
MARSHALL N. MORTON, president/CEO
JAMES A. ZIMMERMAN, VP, Media General; president, Broadcast Division

20. Post-Newsweek Stations WPO

(subsidiary of The Washington Post Co.)
7.44% coverage (FCC)
6 stations
7.44% coverage (total)
550 W. Lafayette Blvd.
Detroit, MI 48226-3123
Phone: (313) 223-2260
Fax: (313) 223-2263
Website: www.washpostco.com
DONALD E. GRAHAM, chairman/CEO, The Washington Post Co.
ALAN FRANK, president/CEO, Post-Newsweek Stations

21. LIN TV Corp. TVL

7.43% coverage (FCC)
26 stations
8.56% coverage (total)
1 Richmond Square
Providence, RI 02906
Phone: (401) 454-2880
Fax: (401) 454-5286
Website: www.lintv.com
VINCENT SADUSKY, president/CEO
BART CATALANE, senior VP/chief financial officer
SCOTT BLUMENTHAL, executive VP, television
GREG SCHMIDT, executive VP, digital media
DENISE PARENT, VP, general counsel and secretary
ROBB RICHTER, VP, Internet

22. Entravision Communications Corp. EVC

6.58% coverage (FCC)
20 stations
12.75% coverage (total)
2425 Olympic Blvd., Suite 6000 W
Santa Monica, CA 90404
Phone: 310-447-3870
Fax: 310-447-3899
Website: www.entravision.com
WALTER F. ULLOA, chairman/CEO
PHILIP C. WILKINSON, president/COO

23. Pappas Telecasting Companies Private

6.40% coverage (FCC)
16 stations
12.10% coverage (total)
500 S. Chinowth Rd.
Visalia, CA 93277
Phone: 559-733-7800
Fax: 559-733-7878
Website: www.pappastv.com
HARRY J. PAPPAS, chairman/CEO
DENNIS J. DAVIS, president/COO
HOWARD H. SHRIER, senior executive VP/COO, TV stations group
STEVEN E. ALFIERIS, VP/special counsel
DALE SCHERBRING, VP/director of engineering

24. Young Broadcasting YBTVA

5.79% coverage (FCC)
11 stations
5.83% coverage (total)
599 Lexington Ave.
New York, NY 10022
Phone: 212-754-7070
Fax: 212-758-1229
Website: www.youngbroadcasting.com
VINCENT J. YOUNG, chairman/CEO
DEBORAH A. McDERMOTT, president

25. Nexstar Broadcasting Group NXST

5.59% coverage (FCC)
32 stations
7.97% coverage (total)
5215 N. O'Conner Blvd, Suite 1400
Irving, TX 75039
Phone: 972-373-8800
Fax: 972-373-8888
Website: www.nexstar.tv
PERRY A. SOOK, chairman/president/CEO
MATT DEVINE, CFO

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