Private Equity Firms Looking to Acquire TV Stations

Sinclair Broadcast
Win McNamee/Getty Images

Sinclair Broadcast

Among the companies that might be in play are Nexstar Media Group, Tribune Media, Sinclair Broadcast and the 14 stations Cox Enterprises has already said are for sale.

Private equity firms Apollo Global Management, Providence Equity Partners and Blackstone Group are interested in acquiring companies that own and operate local TV stations, CNBC reported Tuesday.

Among the companies that might be in play are Nexstar Media Group, Tribune Media, Sinclair Broadcast and the 14 stations Cox Enterprises has already said are for sale, CNBC reported, citing sources familiar with the discussions.

Sinclair Broadcast Group had been set to acquire Tribune Media for $3.9 billion on Aug. 9 but Tribune opted instead to sue for $1 billion, charging Sinclair with misleading regulators and jeopardizing approval. That decision seems to have set off a potential chain reaction of merger-and-acquisitions activity in the TV station industry.

The move, for example, disrupted the plans of 21st Century Fox, which was set to acquire 10 Sinclair stations, but only after Sinclair merged with Tribune, so the Fox-Sinclair deal died when the Tribune-Sinclair deal ended.

Fox, of course, is selling most of its assets to Walt Disney for $71 billion and what remains (called New Fox for now) will not only consist of the Fox broadcast network, Fox News Channel, Fox Business Network, FS1 and FS2, but also 28 local channels, and the entity was looking to beef that up with those 10 Sinclair stations to better position New Fox as a news and sports powerhouse.

Fox, therefore, is back in the market for more stations, possibly even some regional sports networks, given that the Disney deal has all 22 of Fox's RSNs going to the Mouse House, which will then sell them to the highest bidder as a condition of its partial merger (regulators didn’t want 22 RSNs to go to the parent of ESPN).

In a twist caused by the Tribune-Sinclair fallout, New Fox might even bid on the 22 RSNs headed for Disney, though Disney insiders think those could go for as much as $20 billion, in bulk or in pieces, which would represent a premium price New Fox might not be willing to pay.

New Fox also might make a play for Tribune now that its deal with Sinclair fell through, says Barton Crockett of B. Riley FBR.

Meanwhile, if Sinclair isn't interested in letting a consortium of private equity firms buy the company, it will be right back where it started — looking for stations to acquire.

Sinclair, after all, wants to capture a larger U.S. footprint to launch a product that could compete with Fox News, and it will be allowed to do so because the FCC seems poised to relax a rule preventing one broadcaster from owning stations that reach more than 39 percent of households.

In fact, Sinclair CEO Chris Ripley told Wall Street on Aug. 8 that Fox-Disney’s 22 RSNs are a “good fit” with Sinclair.

As for Cox Media Group, it said in July that it has 14 stations it is looking to sell, though it may not want to sell them to Sinclair after the latter failed to close its deal with Tribune.

Crockett told his Wall Street clients that he figures Sinclair will beat the $1 billion lawsuit but that it is also left with a black eye that will hurt its future M&A plans.

If he's right, it could create an opening for Tegna (with 46 stations) and Nexstar (which owns, operates or programs 170 stations) to scoop up some of Cox’s assets and leave Sinclair hanging, yet again. Assuming, of course, that private equity firms don't purchase Nexstar or Tegna.

Right after the demise of its Tribune merger, Sinclair said it will buy back $1 billion of its own stock, which Crockett sees as the smart move for now. “Sinclair should probably focus more on repurchase, until, with time, the wounds here fade, and it can get more into the regular mix of M&A,” he said.