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Sinclair Buys Four Points Media For $200M

The Four Points group includes seven stations in four markets, including the CBS affiliates in Salt Lake City and Austin, Texas. The seller is Cerberus, a private equity firm. Sinclair will operate the stations under an LMA prior to closing.

Sinclair announced today that its buying Four Points Media’s seven stations for $200 million, which translates into a pro-forma multiple of 6.5 times blended 2010-11 cash flow.

Sinclair anticipates that it will receive U.S. Justice Department approval for the acquisition by the end of the month and hopes to take over management of the stations from current manager, Nexstar, by Oct. 1.

Sinclair has already paid $20 million to lock in the deal and will tap a term loan, a revolver or cash on hand to pay the remaining $180 million. The company expects the deal to close in the first quarter of 2012, depending on FCC approval.

A number of companies, including McGraw-Hill and Freedom, have put up for-sale signs in the past year, but the Four Points transaction, which had not been announced, is the only one to have been consummated thus far.  “We believe it’s the largest transaction in three years,” said David Amy Sinclear EVP-CFO.

Does the Sinclair-Four Points deal mean that 6.5 times is the new bar height for broadcast M&A? Depends on whether you’re asking the buyer or the seller as Amy was careful to spell during today’s conference call on the sale.

He declined to offer specifics on what the seller multiple was, but noted that 6.5 times was “nowhere near what the seller was looking at. We’re just going to discuss operating synergies and what we bring to table,” Amy said. “We think the 6.5 multiple really speaks for itself. We’re not going to go back and get into the performance Four Points was enjoying.”

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The 6.5 pro-forma multiple Amy noted is what the $200 million price would factor out to if the stations had been part of Sinclair’s group for the last two years.

Sinclair is buying the group, which includes five full-power and two low-power stations, from Cerberus Capital Management. Cerberus acquired the stations from CBS in 2008, paying $185 million. Veteran broadcaster Dick Reingold advised Cerberus on the acquisition and ran the group for several months before Cerberus contracted with Nexstar in early 2009 to take over management of the group.

At the time of that deal — the recent pinnacle of broadcast M&A — multiples ranged from 11 to 14 times cash flow for sellers. Sources familiar with current broadcast M&A speculate that McGraw-Hill’s asking price for its four stations represents about a 10X multiple of the roughly $20 million in blended 2010-11 cash flow the stations are expected to generate.

Amy said Sinclair expects the Four Points acquisition to be quickly accretive and projected Sinclair will be able to grow the Four Points stations’ free cash flow “on a low teen [percentage] basis” in short order.

He noted that the stations are “in prime middle markets” and “a perfect complement to our already dominant middle market footprint.”

The Four Points group encompasses five full-power stations: KUTV (CBS) and KUSG (RTN) in Salt Lake City (DMA 33); WTVX (CW), in West Palm Beach, Fla. (DMA 38); KEYE (CBS) in Austin, Texas (DMA 49); and WLWC (CW) in Providence, R.I. (DMA 52); and two low-powers — WTCN-CA (MNT) and WWHB-CA (Azteca), both in West Palm.

Sinclair has 46 stations in markets ranging from Tampa-St. Petersburg (DMA 14) to Peoria-Bloomington (DMA 116). Most, as Amy observed, are in midsize markets.

Amy noted that the Salt Lake City and Austin stations are in state capitals, already transmit in HD and should require little in capital expenditures.

Although the deal spells the end of Nexstar’s annual $2 million management fee for operating the stations, Nexstar should still exit happy. Under terms of its contract with Cerberus, Nexstar was to receive a minimum of $10 million in fees if the stations sold within three years. The timing of the deal suggests that Nexstar will receive an addition $4 million on top of the annual management fees.

A source familiar with the deal said that Nexstar had expressed an interest in the Four Points stations but the $200 million was “substantially above” what it was willing to pay.


Comments (24)

Leave a Reply

Kent Replogle says:

September 8, 2011 at 1:39 pm

Nexstar’s cash flow will be decreased by 2+ million. RIP Nexstar.

J M says:

September 8, 2011 at 2:09 pm

More markets for HEY, Mobideals and Ring Of Honor. Salary cuts are in the works and start planning those 70 hour work weeks.

    Roger Lyons says:

    September 8, 2011 at 11:20 pm

    Not to mention a few more clearances for “The Right Side with Armstrong Williams” and the Mark Hyman editorial.

    len Kubas says:

    September 9, 2011 at 1:23 am

    Hey! Mark’s a friend of mine. You trying to impede his freedom to speak?

    Roger Lyons says:

    September 9, 2011 at 7:37 pm

    That’s not what I said. Each station should set its own editorial policies based on market, not have some executive in Baltimore choose the agenda for every station, which is what Sinclair does by airing the one-sided commentary and talk programs in each of the markets they operate in.

    Personally, I find it odd that a station group could push such a conservative agenda, yet air shows some on the right may find offensive, such as “Maury” and “Jerry Springer.”

sally kidd says:

September 8, 2011 at 2:31 pm

First…all of the staff of the existing entity should start looking for jobs. You really don’t want to work for Sinclair Broadcasting unless you like verbal abuse, top down management, and little respect from your bosses plus, more than likely, a lower wage for your efforts. If you do robot well, if you have no pride, and you really dig being made to feel small you should love Sinclair. Just ask the folks who used and still work there.

    Teri Green says:

    September 8, 2011 at 4:21 pm

    Well that’s every where, now-a-days. Employers know they have the upper hand. Don’t delude yourself by thinking any other company is gonna do any less.

    len Kubas says:

    September 8, 2011 at 4:32 pm

    yeah, “bottom up management” exists just where? Isnt’ the take-away here that SOMEBODY is actually investing in over-the-air television? Nexstar was willing to take money, but not put any in.

    Andrew MacDowell says:

    September 8, 2011 at 5:00 pm

    Being a former employee of SBG, I can attest to everything that you said.

pete marquardt says:

September 8, 2011 at 3:40 pm

The comments I am reading tell us alot of what it is like these days in media. If groups could train monkeys to do their bidding there would be a monkey with bananas giving orders. I remember when it used to be fun to be in Television

Teri Green says:

September 8, 2011 at 4:26 pm

One of the things to realize is now you can do more with less. You don’t need so many employees. In my business we used to have a GM, a Controller, a Sales Director in each location. Now we have ONE GM, ONE Contoller and ONE Sales Director. Instead of doing on property each oversees about 5 or 10. And the day to day business is taken care of by low level employees making around $25,000/year. People think this means low pay, but it’s not. People were being paid TOO MUCH in the past. I am not happy people are losing jobs, I lost mine, but the fact is with computers one person can now oversee a lot more. This mean more efficiency less jobs. It’s not new, it’s just an adjustment and it’s been going on centuries, since the “knitters” were put out of work by the first knitting machine

    Joe Reaves says:

    September 8, 2011 at 5:02 pm

    You can do more for less, but it sure shows up on the screen. The mantra of “excellence in broadcasting” has been replaced with “there is a fortune to be made in 4th place. . .”

    Brian Walshe says:

    September 9, 2011 at 1:03 am

    Eric says: “And the day to day business is taken care of by low level employees making around $25,000/year. People think this means low pay, but it’s not. People were being paid TOO MUCH in the past.”

    Really? And $25,000 these days is like what… $10,000 was 15 years ago, and people were just getting by on that. I’m sure we’ll see more low-level people being replaced in more markets as time goes by. But when the digiframmis freezes up… who’s going to be there to make sure the programs and spots run? Oh, and the Legal ID? Last year I was in Secaucus, NJ checking out the NYC area Over the Air reception from my hotel and found a similar problem with a NYC LP that transmits off of Empire as I recall. It took a good bit Googling and a few phone calls to find someone… who reached a contract someone that actually fixed the problem. The next day.

    Lost income. Possible fines. NO service to the community of license. But who cares, anyway, hmm?

Elaine Kurtenbach says:

September 8, 2011 at 4:32 pm

television = newspaper with electricity. bzzzzz it’s dead

    len Kubas says:

    September 8, 2011 at 4:34 pm

    who is buying newspapers these days (aside from Murdoch’s purchase of the wall street journal?) Do you want to use Tribune co as an example?

Bob Moreno says:

September 8, 2011 at 4:36 pm

Yearning for the “good ol days” is beating a dead horse. Is it not fun because people actually have to do some work? Is not hitting the golf course a few times a week all that bad? No more afternoon scotch with Don Draper? Selling TV is still a pretty fun and relatively easy job…it’s just misrepresented by those who compare it to how it was 20+ years ago and haven’t been willing or able to adapt. Is anything the way it was 20 years ago?

none none says:

September 8, 2011 at 4:42 pm

I work for a television station where people come to work everyday and ENOY THEIR JOBS. They are paid a fair wage for what they do and they are thankful not to be the folks laying asphalt on the street outside the station.
We still work in a great business – Go out and enjoy it – or quit and I’ll see you on the street laying the asphalt.

Jay Miller says:

September 8, 2011 at 4:44 pm

If the people at the staions in Utah and Texas pray, they should now pray extra hard. The mangement of Sinclair are uptight, micro managers who know nothing about how to run anything except 4th and 5th rated stations. News is just an expense to them and they will screw these stations up. They do not run an ABC,CBS,or NBC afiiliate in any of their markets that are in first or second place in ratings and revenue.

    Andrew MacDowell says:

    September 8, 2011 at 5:04 pm

    They should start looking for work now.

    Andrea Rader says:

    September 8, 2011 at 7:50 pm

    Hogwash. WGME in Portland is a solid #2, and vies for #1 at 11PM weekdays.

Al Ming says:

September 8, 2011 at 4:46 pm

Well, well. With Nexstar’s fingers in the pot y’all are in for the infamous ‘rude awakening’. Good luck, folks; you’re really gonna need it.

Hope Yen and Charles Babington says:

September 8, 2011 at 4:57 pm

…and it was a LOT of fun working with Mr. Peluso in Tallahassee! 😉

Jay Miller says:

September 9, 2011 at 9:33 am

WGME is a joke in a joke market!

    Andrea Rader says:

    September 9, 2011 at 9:54 am

    So when you’re confronted with evidence that gives the lie to your blanket accusation you simply choose to marginalize the station and the market?


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