Sinclair Gets Tribune Media In Mega-Deal


Following rumors late Sunday that a deal was imminent, Sinclair Broadcast Group and Tribune Media Co. at 8am Central today announced that they have reached a deal that will see Sinclair acquire all of the issued and outstanding stock of Tribune for $43.50 per share, for an aggregate purchase price of approximately $3.9 billion.

Sinclair will also assume approximately $2.7 billion in net debt.

The $6.6 billion enterprise value represents an average pro forma EBITDA multiple of less than 7.0x on the core television and entertainment business and is expected to add over 40% pro forma 2016/2017 free cash flow per share accretion, Sinclair said in its announcement.

The deal, which thwarts an effort by 21st Century FOX to acquire Tribune Media, will see Tribune stockholders receive $35 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune Class A common stock and Class B common stock they own.

The total $43.50 per share consideration represents a premium of approximately 26% over Tribune’s unaffected closing share price on Feb. 28, 2017, the day prior to media speculation regarding a possible transaction; approximately 14% over Tribune’s 30-day volume weighted average closing stock price; and approximately 8% over Tribune’s closing share price on May 5, the last trading day prior to today’s announcement.

This shows the effect media can have on boosting a stock’s share price while negotiating a deal—a benefit for Tribune, in this case.

Tribune owns or operates 42 television stations in 33 markets, including flagship WGN-9 in Chicago, WPIX-11 in New York and KTLA-5 in Los Angeles; cable network WGN America, digital multicast network Antenna TV, minority stakes in pay-TV entity Food Network and website, and a variety of real estate assets.

Tribune’s broadcast TV stations are comprised of 14 FOX, 12 CW, 6 CBS, 3 ABC, 2 NBC, 3 MyNetworkTV affiliates and 2 independent stations.

Interestingly, the announcement did not note the ownership of heritage News/Talk WGN-AM 720 in Chicago, which Sinclair will presumably control.

Sinclair’s only other radio holdings are in Seattle, where it inherited News KOMO-AM & FM, Talk KVI-AM and Hot AC KPLZ-FM “Star 101.5” with Sinclair’s August 2013 acquisition of Fisher Broadcasting.

“This is a transformational acquisition for Sinclair that will open up a myriad of opportunities for the company,” Sinclair President/CEO Chris Ripley said in prepared comments ahead of an 11am Eastern conference call with financial analysts to discuss the first blockbuster deal to be seen since the FCC eliminated its “UHF discount” at its April Open Meeting.

Ripley continued, “The Tribune stations are highly complementary to Sinclair’s existing footprint and will create a leading nationwide media platform that includes our country’s largest markets. The acquisition will enable Sinclair to build ATSC 3.0 (Next Generation Broadcast Platform) advanced services, scale emerging networks and national sales, and integrate content verticals. The acquisition will also create substantial synergistic value through operating efficiencies, revenue streams, programming strategies and digital platforms.”

Sinclair Executive Chairman David Smith added that the Tribune deal is the largest in its history, saying, “Television broadcasting is even more relevant today, especially when it comes to serving our local communities.  Tribune’s stations allow Sinclair to strengthen our commitment to serving local communities and to advance the Next Generation Broadcast Platform.  This acquisition will be a turning point for Sinclair, allowing us to better serve our viewers and advertisers while creating value for our shareholders.”

Tribune CEO Peter Kern noted that the merger is “the culmination of an extensive strategic review, which has delivered significant value to our stockholders. Since we announced the strategic review 15 months ago, we have streamlined the business, monetized non-core assets, strengthened our balance sheet and returned more than $800 million to stockholders — all of which has resulted in a 50% increase in stockholder value.  We are extremely proud to join Sinclair, and we’re excited that Tribune stockholders and employees will have the opportunity to participate in the long-term growth of the combined company.”

It’s a monumental move for Kern, and for Tribune.

Peter Liguoria television industry veteran who took the reins as President/CEO of Tribune Media Co. in January 2013, stepped down from his role immediately following the release of the company’s Q4 2016 and full-year earnings.

Flashback to December 2009, and RBR+TVBR was reporting that Tribune COO and iconic radio industry executive Randy Michaels had been promoted to CEO by the company’s board of directors, with the embattled Sam Zell continuing as Chairman as Tribune Co. was mired in Chapter 11 bankruptcy reorganization.

Today, with unanimous approval by the Boards of Directors of both Sinclair and Tribune Co., the end of a storied company with a tremendous legacy in Chicago is set to come in Q4 2017.

The transaction is subject to approval by Tribune’s stockholders, as well as customary closing conditions, including FCC approval and Department of Justice antitrust clearance. To comply with FCC ownership requirements and antitrust regulations, Sinclair may sell certain stations in markets where it currently owns stations. Such divestitures will be determined through the regulatory approval process.

Sinclair expects to fund the purchase price at closing through a combination of cash on hand, fully committed debt financing to be provided by JPMorgan Chase Bank, Royal Bank of Canada (RBC), Deutsche Bank AG (New York Branch) and Deutsche Bank Securities and by accessing the capital markets.

Including the Tribune acquisition (before any related divestitures), all previously announced pending transactions, and pro forma for expected synergies, Sinclair’s 2015 and 2016 media revenues would have been $4.070 billion and $4.603 billion, respectively.

J.P. Morgan Securities LLC acted as exclusive financial advisor.

Fried, Frank, Harris, Shriver & Jacobson LLP, Pillsbury Winthrop Shaw Pittman LLP and Thomas & Libowitz P.A. acted as legal advisors to Sinclair in connection with this transaction.

Moelis & Company and Guggenheim Securities acted as financial advisors and Debevoise & Plimpton LLP and Covington & Burling LLP acted as legal advisors to Tribune in connection with this transaction.