This hugely strategic deal for Sinclar has not only broadened its horizons but has also provided it stakes in WGN America and the Food Network.
Sinclair Broadcast Group Inc disclosed on Monday that it would acquire one of the largest television station operators in the U.S, the Tribune Media Co for nearly $3.9 billion.
Once this deal goes through, Sinclar will get a greater foothold in U.S. cities, including Chicago and New York.
With the news hitting the market, Tribune’s shares rose by 5.2% to $42.42 while Sinclair’s fell by 3% to $35.90.
Sinclair’s acquisition is unlikely to face much headwinds given the recent U.S. Federal Communications Commission (FCC) vote to reverse a 2016 decision which limits the number of television stations some broadcasters can buy.
Nevertheless, Sinclair may still be forced to sell a few stations in Salt Lake City and in St. Louis so as to comply with FCC rules, said Chris Ripley, Sinclar’s Chief Executive on a conference call.
Tribune’s sale marks the end of a long journey since its foundation days more than 150 years ago and comes midst a decade of turmoil for the company.
It was first acquired by Sam Zell, a real estate mogul, then it changed hands and was owned by private equity firms. In late 2012 having emerged from bankruptcy, it completed a spinoff of its newspaper assets in 2014 and became the company it is today.
As per Marci Ryvicker, an analyst at Wells Fargo, one of the biggest factors in the deal is its cost saving aspect, specifically that of retransmission fees. Essentially these are payments made by stations to broadcasters such as NBC, Fox and CBS to carry their programming.
Tribune’s portfolio is likely to help expand Sinclair’s sizeable network of 173 stations in 81 U.S. markets.
Significantly as part of the deal, Sinclair will also get a stake in WGN America and the Food Network, a joint venture between Scripps Network Interactive Inc and Tribune.
Sinclair’s offer of $43.50 per share represents a 26% premium over Tribune’s closing price on Feb. 28. Tribune’s shareholders will receive $35 in cash and a 0.23% share of Sinclair’s stock for each share of Tribune held by them.
Sinclair will assume about $2.7 billion in debt in the deal, which is expected to close in the fourth quarter.
While Guggenheim Securities and Moelis & Co advised Tribune, J.P. Morgan advised Sinclair.