News Corp. plots station break

Sale of 9 affils could pave way for more acquisitions

Rupert Murdoch's News Corp. plans to sell nine of its Fox network-affiliated TV stations in smaller markets where it has no duopoly to raise cash it can redeploy into growth areas or for possible acquisitions.

News Corp. said Wednesday that it has retained Allen & Co. to advise it on potential transactions that could reduce its total number of TV stations to 26. Industry and company sources said that TV groups and private-equity firms are among the possible bidders.

News Corp. didn't give a timeline or other terms for the planned sale, but observers said the stations could be sold piecemeal to different buyers, with a first deal conceivable in a few months.

The following stations are earmarked for sale: WJW Cleveland, KDVR Denver, KTVI St. Louis, WDAF Kansas City, Kan., WITI Milwaukee, KSTU Salt Lake City, WBRC Birmingham, Ala., WHBQ Memphis and WGHP Greensboro, N.C.

A spokesman for the media conglomerate said there are "strategic reasons" for the divestitures. News Corp. could use the cash to fund the proposed $5 billion takeover of Dow Jones & Co. or buy online or overseas TV assets. News Corp. has, for example, been expanding its TV properties in Eastern Europe.

News Corp. emphasized that it feels its TV station portfolio will remain strong even after the proposed sales, and it will retain all its stations in markets in which it has a duopoly.

The company said that if all nine stations are divested, the Fox Television Stations group "will remain one of the nation's strongest and most successful station groups, with nine duopolies in major markets as well as single stations in eight mid- to large-sized markets."

News Corp. has TV station duopolies, which allow for cost savings across two stations in the same market, in Los Angeles, New York, Chicago, Dallas, Washington, Minneapolis, Houston, Orlando and Phoenix.

Miller Tabak + Co. analyst David Joyce said in a rough first estimate that the stations sale could raise as much as $1.9 billion for the media giant.

"News Corp. does not have to sell anything to fund any Dow Jones transaction that might occur," Joyce said. "Even if they pay a premium to their current $5.3 billion offer, say, $6 billion, they currently have $7.2 billion of cash on the balance sheet."

Nonetheless, the sale would boost the company's financial flexibility, Wall Street observers note.

Joyce estimates that News Corp.'s TV station group overall will do $817 million in operating income before depreciation and amortization this year, which he estimates would translate into an enterprise value of $7.35 billion-$8.99 billion.

Meanwhile, a source said that News Corp. could receive as early as today a new proposal from the Bancroft family that controls Dow Jones on how to safeguard the Wall Street Journal's editorial independence after a possible sale to News Corp.
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