The phone finally rang," said Young Broadcasting Chairman Vincent Young of the $650 million sale of Los Angeles independent station KCAL(TV) to Viacom.
Pending FCC approval, possibly by mid-year, KCAL will join KCBS-TV in a Viacom duopoly in the nation's second-largest market. Viacom will then own 34 TV stations and have eight major-market duopolies.
Analysts were clearly impressed by the price. Young bought the station in 1996 for $387 million from Disney, which was forced to sell when it took over ABC, which already owned KABC-TV Los Angeles at a time when duopolies were banned.
But duopoly synergy is the goal in the current deal, and it has changed the formulas commonly used for valuing stations. Young noted that the station sold at a multiple of 32 times its 2001 cash flow of just over $20 million.
Both Viacom President Mel Karmazin and station-group head Fred Reynolds said the $650 million price should represent about 12 times KCAL's cash flow for the duopoly's first full year.
"The combination of KCAL and KCBS-TV will elevate Viacom to the top in television advertising revenue, with nearly 19% share of the $1.6 billion L.A. ad market," said Karmazin.
"The synergies," said Reynolds, "are in the tens of millions of dollars." Young also predicted a stronger 2002 for TV generally.
Some Los Angeles insiders suggested that KCAL station and news management could lose their jobs. But Reynolds said that not all his group's duopolies have consolidated top management and that he looks for sports and news programming synergies to improve coverage.
The talent: KCBS-TV General Manager David Woodcock is a former KCAL GM who hired current KCAL GM Don Corsini away from KABC and later was succeeded by him; KCAL News Director Nancy Bauer Gonzales was previously news director at KNBC-TV; KCBS-TV News Director Princell Hair, with major-market experience in Chicago and Baltimore, is the group's second-ranking news executive.
Young officials had suggested some interest in KCAL among major station players. Viacom said it was unaware of any competition. NBC already has a duopoly pending, and ABC has reportedly expressed no real interest in either KCAL or Young's KRON-TV San Francisco.
Analysts suggest that the cash infusion makes Young a little less desperate to sell KRON-TV, which has proved a more difficult deal. NBC, outbid for KRON-TV before by Young's $750 million, negotiated with Young late last year but instead bought Granite's KNTV(TV) San Jose, Calif., which took over the NBC affiliation from KRON-TV. And, while there has been no confirmation and there are some potential regulatory obstacles, some brokers assert that CBS, Tribune, Hearst and ABC are the most likely candidates, though not at a price that covers Young's $750 million.