Consolidation: Another $5 Billion to Go?
Rise of the Station Super-Groups
Spree Dazzles Street, Puzzles Stations
Gannett's acquisition of Belo didn't last long as deal of
the year, as Tribuneâ€”in a resounding endorsement of the local broadcast
businessâ€”has agreed to acquire Local TV LLC for $2.725 billion.
That adds 19 TV stations in 16 key markets to the group;
coupled with Tribune's own 23 stations, Tribune is billing itself "the No.
1 Local TV affiliate group in America."
Local TV is principally owned by Oak Hill Capital Partners.
It was largely expected that the group would be acquired by multiple buyers.
"Since joining Tribune in early 2013, we have been
setting the strategic foundation to transform Tribune and help chart the path
forward-building our multimedia capabilities and asset portfolio to become the
country's leading independent content creator and distributor," said Peter
Liguori, Tribune president and CEO. "This is a transformational
acquisition for Tribune expands the distribution platform for our high-quality
video content, and extends the reach of our digital products to new audiences
across the country. We couldn't be more excited about Tribune's future as
America's leader in creating and distributing original content and local news
The deal is subject to regulatory approval and is expected
to close by the end of 2013.
The Local group includes seven Fox, five CBS, two ABC and
two NBC stations. Tribune and Local TV know each other well; the two created a
third-party management company late in 2009 to handle back-office and
administrative work for both companies' stations. Local also has services agreements with Tribune for stations in Denver and St. Louis.
"Local TV and Tribune have had a long, successful
relationship over the last five years," said Bobby Lawrence, CEO of Local
TV. "Our cultures and operating philosophies are very similar, and we share
a strong commitment to news and local programming excellence. My management
team will dearly miss working with some of the most talented and dedicated
people in broadcasting, but we know we leave our employees in good hands. I am
grateful to our partners at Oak Hill Capital, who acquired the finest stations
in the industry and helped us build this great company."
The quest for scale is driving the torrid M&A activity
in local television.
Tribune said the deal gives it "significant scale to
drive its principal business objectives and create substantial shareholder
value. The scale provided by the Local TV acquisition will enable Tribune to
maximize national and local advertising opportunities and take advantage of a
larger footprint, across which it will distribute its video and digital
content, especially that created by the recently launched Tribune Studios and
Tribune Digital Ventures, as well as its best-in-class journalism."
Tribune also said the acquisition "will also lead to more meaningful conversations
with affiliates about distribution" for its cable channel, WGN America.
Tribune anticipates the acquisition will generate more than
$100 million in annual run-rate synergies within five years after closing,
creating a purchase price multiple of approximately 7X blended 2011 and 2012
Tribune exited bankruptcy at the end of 2012.
Its portfolio will increase from 23 to 42 stations, and include 14 CW
affiliates, 14 Fox affiliates, five CBS affiliates, three ABC affiliates, two
NBC affiliates and four independents. Tribune will own 14 stations in the
country's top 20 markets and says it will become the No. 1 Fox affiliate group.