Between January and May, Nexstar outbid Sinclair three times in an effort to buy Tribune Media, but in the final round on May 6, Sinclair won the prize with with an offer of $43 per share, $2 more than Nexstar, according to an SEC filing, The only other serious bidder was Fox, but it dropped out before the final rounds, the filing says.
Nexstar Lost Tribune Bidding War To Sinclair
Sinclair announced on May 8 an agreement to purchase Tribune Media for $2.9 billion in cash and stock ($43.50 per share), but only after winning a four-month bidding war with Nexstar that raised the per share price nearly $12, according to a Sinclair SEC S-4 filing detailing the deal for shareholders.
Tribune began preliminary discussions with Sinclair and Nexstar (“Bidder B” in the filing) in October 2016 “to discuss potential station swaps, partnerships, joint ventures and other strategic alliances involving Tribune’s television stations.”
But those discussions went nowhere, the filing says.
Sinclair was the first to talk money on Jan. 18, offering $32.90 per share. Nexstar followed two weeks later, saying it could pay between $33.32 and $34.77 based on current trading multiples.
On March 24, Sinclair and Nexstar both upped their bids — Sinclair to $38 and Nexstar to $39-$40.
On April 24, Tribune asked Sinclair and Nexstar for final bids on May 4. On that date, Sinclair came in with a bid of $38.50. but Nexstar topped it at $40.
BRAND CONNECTIONS
Because the bids were so close, Tribune asked for a final round on May 6.
Nexstar went to $41, while Sinclair submitted what would be the winning bid of $43. Subsequent negotiations over the split between cash and stock in the bid nudged the final price to $43.50.
Sinclair and Nexstar were not the only players, according to the filing. By March 29, six other broadcast groups and six private equity firms had expressed varying degrees of interest in Tribune or its parts, it says.
Only one of these others went so far as to make a bid. That was Fox in partnership with the Blackstone private equity firm, referred to as Bidder D in the document. On April 20, it said it would pay between $40 and $44.
Thereafter, Tribune included Fox/Blackstone in the sale process. However, when May 4 rolled around, Fox/Blackstone failed to submit a bid along with Sinclair and Nexstar.
Comments (30)
Jayson Siler says:
July 6, 2017 at 9:50 am
Let’s not lose sight of the fact that Sinclair paid a trailing cash flow multiple of roughly 5.5 for Tribune. What does that say about the state of the local TV business model?
alicia farmer says:
July 6, 2017 at 10:26 am
It says local TV stations are worth around 40% less than ten years ago.
Dan Levitt says:
July 6, 2017 at 10:27 am
it’s all about the Reps and Programmatic. Nextstar uses Katz, Sinclair and Tribune use CoxReps. The bidding “war” never intended to go to Nexstar, anybody who know what is going on with Programmatic would Know that, Coxreps (Cox Media) is the one pulling the strings in these decisions. DOJ looking into the Programmatic as we speak in continuation of the Ad Agency Bid-Rigging and Kickback Scandal. Stay tuned….
Khristian Lee says:
July 6, 2017 at 11:18 am
Sinclair splits between Katz & COXReps, actually. And if anything, Sinclair just bought themselves some rep office space in NY, LA and Chicago with this purchase. If anything, this looks like Sinclair is planning a self-rep model in the near future, which would hurt both CoxReps and Katz, and most likely spell the end for Katz if they can’t pick up another group.
John Bagwell says:
July 6, 2017 at 12:56 pm
You are right in that they might self rep, but they also might not. Creating a full self-rep would be expensive at a time when they are just about to spend $4B (plus the debt) to buy Tribune. Will be interesting to see what happens.
kendra campbell says:
July 6, 2017 at 1:02 pm
1.5% difference between self rep and Cox/Katz is big money when looking at this scale.
Khristian Lee says:
July 6, 2017 at 2:14 pm
Agreed. With that many stations, 1.5% is a no-brainer. You could hire a decent sales force along with researches, etc and save millions.
John Bagwell says:
July 6, 2017 at 2:27 pm
Besides the hiring, there would be a ton of upfront costs related to the sales systems (wide orbit, media ocean etc.), research, and IT. Again, I am not saying it won’t happen, I’m just not sure it will be one of their first priorities once they close on Tribune. Perhaps a few years down the line. We’ll see.
Snead Hearn says:
July 6, 2017 at 11:00 am
5.5 trailing cash flow says value has dropped substantially in the past 5 years. Sinclair still paid a lot of money for Tribune…
Dan Levitt says:
July 6, 2017 at 1:02 pm
yes, agreed, would make sense for Sinclair to Self Rep if Tribune Deal goes through
Dan Levitt says:
July 6, 2017 at 1:41 pm
though, when did making sense ever play a factor in TV? Cox is too powerful to let Sinclair Self Rep, Cox and buy Sinclair/Tribune Tegna & Nexstar chew them all up and spit them out. Cox likes to keep under the radar with a low-profile handful of stations, meanwhile it is pulling the strings in the world of Programmatic. They are smart though – they don’t need to invest in stations, they just control them. We’ll see how Cox fares when the DOJ announces it’s findings of the corrupt world of Ad Agency kickbacks, bid-rigging and the programmatic BOTS that determine the prices of Spot advertising
kendra campbell says:
July 6, 2017 at 2:12 pm
“Cox likes to keep under the radar with a low-profile handful of stations…” Like the 400+ they represent in 87% of the country? “They don’t need to invest in stations…” Like the 15 they own?
Dan Levitt says:
July 6, 2017 at 1:43 pm
that is: Cox CAN buy those stations groups and spit them out.
maybe one day TVNewscheck will splurge the extra $50/mo. so people can fix their typos with an edit feature.
Khristian Lee says:
July 6, 2017 at 2:18 pm
But you’re confusing Cox with CoxReps. CoxReps isn’t profitable and the only reason Cox (probably) keeps them around is that they provide a macro view of where the ad dollars are being spent, particularly in a political year. Sinclair can save the percentage it pays both CoxReps and Katz by going in-house, and with this many stations I don’t see how that’s a massive savings. Grey did it and saved something like $16m/year.
Khristian Lee says:
July 6, 2017 at 2:19 pm
*How that’s NOT a massive savings*
alicia farmer says:
July 6, 2017 at 2:32 pm
Say what? CoxReps is absolutely profitable. When you go in-house the savings isn’t the percentage once paid to the rep. It’s the difference between the outside rep % and total in-house costs – salaries, benefits, office space, entertainment, travel, etc. There is no way Grey actually saved $16 million a year.
John Bagwell says:
July 6, 2017 at 2:33 pm
True, but Grey doesn’t have reps. They just pass it along to the NSM’s at the stations, I believe. I am not exactly sure how it is going, but I’ve not heard positive things. If they did go in-house, I think Sinclair would rep like the O&O groups do.
alicia farmer says:
July 6, 2017 at 2:37 pm
Most likely Grey “saved” $16 million, while losing $32 million.
Dan Levitt says:
July 6, 2017 at 4:32 pm
uh, Coxreps rakes in $2Billion/yr in Billing and they don’t have any overhead, most people would call that highly profitable. Tribune on the other hand takes in less than $2Billion and owns dozens of properties and thousands of employees and thousands of bills to pay. But hey, maybe my math is off by a few bucks. that’s $2Billion a year for Coxreps for picking up the phone, sending an e-mail, pressing a computer key to execute an order and maybe a handshake on a business lunch.
Khristian Lee says:
July 6, 2017 at 4:57 pm
Billing vs. their contractual percentage of that billing are two ENTIRELY different things.
William Bremner says:
July 6, 2017 at 3:12 pm
why would sinclair build an electric company…..when they can just pay the electric bill. For the record Gray is spelled GrAy not like the color Grey…although their stock price has been grey dipping to 52wk lows….
Snead Hearn says:
July 6, 2017 at 3:50 pm
I would believe Sinclair has the rep part figured out and will make the transition without fear. I believe Sinclair and Nexstar are both very smart at acquisitions but operating and growing the station profitability will require a substantial reduction in operation costs and growing the top line. Sinclair and Nexstar have proven they can cut expenses but truly growing the market and core revenue is still open for debate.
Khristian Lee says:
July 6, 2017 at 4:12 pm
Sinclair’s deal with the reps is RUMORED to be over by the end of they year. If 2018 proves to be a heated political environment for local stations, why pay a % for someone else to input the orders? They already have office space for a political in-house rep firm at WJLA in Washington, DC. Soon they’ll have office space for an in-house rep in the other big markets. If they’re paying (at best) 3%, there is absolutely no way they can’t hire a small army and still save money.
If formergm is right and CoxReps is “absolutely profitable” then Sinclair’s bean counters can/will certainly figure out how to squeeze a profit from that same model, especially with those kind of savings.
alicia farmer says:
July 6, 2017 at 4:42 pm
“3%”? Try 5.5 – 6%. A quality in-house operation will cost 4+%,
Dan Levitt says:
July 6, 2017 at 4:52 pm
be careful, Cox Eneterprises is Big Brother, they are listening to everything we say….. the family is the 5th richest family in America ($41 Billion). If they thought there were a future in owning TV Stations they would have gobbled up whoever they wanted to, they only have just over a Dozen stations – if they thought buying Sinclair and Tribune was a good idea, they could have done it. They own only 16 stations but control the Ad sales for stations that cover 90% of U.S. households.
William Bremner says:
July 6, 2017 at 4:39 pm
When the reps game has gone from 26 competitors (including O&O reps) down to 6 (including O&O’s) and Katz is on the verge of bankruptcy – It doesn’t look like that’s the game to get into….Ask Gray……
kendra campbell says:
July 6, 2017 at 4:46 pm
Gray is very small and clueless. Sinclair is very big and smart.
Dan Levitt says:
July 6, 2017 at 10:54 pm
Rep firms going from 26 to 6 doesn’t mean the Rep jobs are disappearing, Most firms have devoured the others albeit there comes consolidation with that. Coxreps is actually 3 firms (TeleRep,HRP & MMT) that have actually devoured a few others. It’s a natural progression in a Biz where there’s a constant consolidation process just like we’re talking about Sinclair taking over Tribune (after tribune took over LOCAL TV) Verizon looking to take over Disney, Altice taking over Tribune…. I mean, that process never stops – there’s consolidation across the board Not just with Sales reps.
Cheryl Thorne says:
July 7, 2017 at 7:18 am
Sinclair is building a network to rival the O and O’s..For those of us who have competed against Nexstar thank the lord!!! They are the best at hurting local markets …We need another network because the current ones have failed us..they use to be relevant but the only thing they currently do well is Sports which has really hurt them financially and a few sitcoms and dramas..They have totally failed us on the news and information front..Hopefully Sinclair will do it right…As for Gray..Small town operators..posers…they have purchased some very well run stations in the past 5 years and made dumb personnel changes and of course their in house rep move is the laughing stock of any one who has a clue …Gray and Nexstar (with the exception of the personnel they gained from Lin) are the stockyards of C and D students at best especially the Media General and Young station personnel!! The only people making $$ from Gray are the “Short Sellers” and Nexstar will be next…LOL
Shelly Oliver says:
July 7, 2017 at 10:49 am
You Gray bashers crack me the hell up. You obviously are all in love with a business model that is no longer relevant. All the rep firms are now a days are a bunch of people making $35K a year and hitting the forward button on emails from the NSM’s / station contacts and sending to the agency. Why would any group want to pay a commission for that, when they can simply do it themselves? From everything I’ve heard, agencies like going direct with Gray and feel the service is much better. Also, how can the workloads on NSM’s change in their new model when they did the work anyway when Gray did have the rep. Who quotes rates? Not the rep. Who enters rates for a avail/negotiation? Oh, that’s right…the NSM. Now, instead of sending avails/makegoods to the rep, they can send it directly to the agency/buyer. What a novel concept that is!! And who knows how to sell their station and their market better…than someone actually at that station and in that market!! Again, what a novel concept. Bottom line..the rep model is dead. Who needs a middleman these days to simply hit “forward” on an email / avail submission from the station to the agency, and then accept an order, enter it and send to the station. Yeah, smart business to pay someone commission to do that. Good lord. Oh, and that’s when the reps are NOT busy laying people off!! Gray made a wise decision, and other groups would be smart to follow.