station trading

Oak Hill Capital Partners and TPG — or possibly a combination of the two — have emerged as the top candidates to buy out Nexstar majority owner ABRY, a Boston-based private equity firm. However, virtually all private equity firms with broadcast interests are likely giving the Nexstar deal a look.

In the station group’s earnings call with analysts today, management says they’re in a prime position to take advantage of all the stations now on the block.Said David Amy, Sinclair EVP-CFO: “There’s nothing we have to go out and purchase.… We can be very selective. If the price make sense for us, we can deal.”

The buyer of the San Francisco station is the largest affiliate group of Spanish-language Azteca America. The seller is High Plains Broadcasting, whose stations in San Francisco and five other markets are operated by Newport Television in duopolies.

There are several big TV groups up for sale, enticing prospective buyers with those still-fat margins and the prospect next year of a big jump in revenue from political advertising. Are there buyers? I think so. In addition to other broadcast groups that are looking to expand or strategic acquisitions that lead to efficiencies in any number of ways, there are still the private equity firms that see upside in the business and bankers willing to finance deals. Let’s hope whoever they are, they will be buyers that respect the special role TV stations occupy in their communities and are in the business for the long haul.

Nexstar Broadcasting Group plans to explore strategic alternatives, including a sale. The Wall Street Journal says the station group could go for $1 billion. Moelis & Co. has been retained as financial adviser and Kirkland & Ellis as legal counsel.

McGraw-Hill has begun shopping its four-station group and is said to be drawing interest from the likes of Nexstar, Meredith and Belo. Based on its financials for 2010 and 2011, the group is worth between $150 million and $200 million, although bidding and the expection of big revenue gains from political advertising in 2012 could push the number higher.

OTA Broadcasting won the bankrupt independent with a bid of $5.2 million in auction in Seattle yesterday. Only one other party showed up for the auction, according to broker Kalil & Co. OTA had established a base price for the station with a stalking horse bid of $3.45 milion.

A year out of bankruptcy, the 10-station group is financially healthy and the new owners believe it’s a good time to sell, what with a record year for political advertising expected in 2012. Observers say the group could fetch eight times blended 2011-12 cash flow or as much as $350 million.

In granting Nexstar’s purchase of WFRV Green Bay, Wis., and WJMN Escanba, Mich., from Liberty Media, the FCC also extended a waiver of “main studio” rule for WJMN.

While most agree that the networks’ claims on a chunk of affiliates’ retrans revenues are reasonable, the sticking point is how much. And since stations are valued on the basis of a multiple of cash flow, if a station has to trim its cash flow to pay programming fees to networks or share retrans revenue with them, it devalues the station. All of this is making it difficult to calculate how much stations are worth and is putting a damper on deal-making.