Sources: Allbritton Likely To Pick Two Buyers

With bids for Allbritton Communicatons’ eight stations due Monday, it’s looking increasingly likely there will be two buyers.

Allbritton’s flagship station, WJLA, the ABC affiliate in Washington (DMA 8), probably will go separately, people familiar with the M&A sector say.

Potential buyers for WJLA? Disney-ABC tops many lists.

“I would not be surprised and would be surprised at the same time,” says one source in the financial community. “Just to have a station in Washington would make sense. But they have not bought a TV station in a long time.”

One reason Disney-ABC might have the inside track on WJLA: The station’s ABC affiliation gives the network the right to approve the transfer of the affiliation to a new owner.

When Young Broadcasting infamously outbid NBC for KRON in San Francisco in 1999, NBC pulled its affiliation. Young, unable to ever overcome the economic body blow, was forced into bankruptcy in 2009.

Other possible bidders for Allbritton (possibly including WJLA), are Sinclair, Nexstar, Hearst, LIN, Meredith, Raycom, Scripps and Tribune. A key consideration is the duopoly potential in Allbritton’s other markets: Birmingham, Ala. (DMA 42), Harrisburg, Pa. (DMA 43), Little Rock, Ark. (DMA 56), Tulsa, Okla. (DMA 59), Roanoke, Va. (DMA 68), and Charleston, S.C. (DMA 98). 

“Gaining a duopoly is the most powerful driver behind broadcasting M&A,” says Michael Alcamo of M.C. Alcamo & Co., an investment banking firm. “So the directions that Allbritton’s stations will ultimately go will most likely be determined by who can establish duopolies in those markets.”

With at least two overlaps, Sinclair and Nexstar lead the list. Sinclair has stations in Birmingham and Harrisburg and Nexstar has stations in Harrisburg and Little Rock. LIN has a station in Birmingham, as does Raycom. Scripps has an overlap in Tulsa. Tribune, which recently came out swinging with its $2.73 billion Local TV/FoxCo acquisition, has a station in Harrisburg.

Still, it’s WJLA that distinguishes the Allbritton deal. It marks the first time in more than a decade that a Top-10 market station has gone on the block. That it’s in the nation’s capital further adds to the deal’s unusual nature.

Allbritton’s blended 2011-12 EBITDA was $92.3 million. The company doesn’t break out specific station EBITDA in its SEC filings so it’s unclear what portion of that WJLA contributes. However, it’s likely the lion’s share as Allbritton’s other markets are in DMAs 42-98.

Tribune’s purchase of Local TV/FoxCo implies a multiple slightly north of 12X. At multiples of 10-12X, Allbritton could fetch around $1 billion overall, particularly considering the premium likely to be attached to WJLA.

On another front, there’s speculation that Gannett may have to renegotiate terms of its proposed $2.2 billion acquisition of Belo as Belo’s stock price has climbed past the 28% premium Gannett offered when the deal was announced.

“I think a number of investors are less than thrilled with the price,” says a source familiar with the deal. “It should have been a little bit higher.”

The purchase contract is said to be well-written and protective of Gannett’s financial interests. The contract carries with it a $51 million break-up fee.

“I don’t think anybody wants to get into spitting match with Gannett,” the source said. “They’ve got a great balance sheet.”