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.
JESSELL AT LARGE
Station M&A Set For Rebound: Who Will Buy?
For the past couple of years, I’ve been told by the experts that the M&A market in TV broadcasting was coming back — just give it a few more months. Well, it looks like those experts may finally be right.
We haven’t seen any big deals yet, but we know that there are several big 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.
Nexstar Broadcasting Group was the latest to hang out the for-sale sign. Yesterday morning, it confirmed a WSJ.com story from the afternoon before saying that its 65 stations in 35 markets were available. For how much? I’ve heard everything from $900 million to $1.2 billion.
But Nexstar isn’t the only broadcasting prize out there. On Wednesday, TVNewsCheck’s Price Colman reported that the sale of the four-station McGraw-Hill group was moving apace with plenty of interest from other broadcasters and that a deal could be done early this fall for around $200 million.
Earlier, Colman reported that Young Broadcasting’s 10 stations were being shopped after a nasty bankruptcy and could fetch as much as $350 million. Another bankruptcy survivor, Freedom Communications, has been seeking buyers since last fall. The object of unsolicited bids, Fisher Communications, too, might also eventually have to sell.
So, we clearly have some sellers. What we need to make a market are some buyers. I think they are out there. In addition to other broadcast groups that are looking to expand or make 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, although not nearly to the extent they were five or six years ago.
BRAND CONNECTIONS
Look, Nexstar would not have hired Moelis & Co. to pitch the group if it didn’t think it could attract multiple bidders at this time.
I understand the angst of all you who work at stations in play — GMs, account executives, producers, engineers, reporters. Your fate is out of your control. New owners may have different ways of doing things and big plans that, quite frankly, don’t include you.
Sometimes, the new owners come burdened with a lot of debt they had to take on to buy the stations. Their first order of business may be to cut costs, which is often just another way of saying reduce headcount.
But, you know, people don’t invest in businesses unless they are bullish about its prospects and have some ideas for improving it. Isn’t it better to work for someone looking for ways to build the business than for someone who is simply looking for ways to stop the bleeding?
The new owner could be a broadcaster that pays more than lip service to providing quality news and that can deliver the resources your station needs to exploit the new digital technology. As I’ve said here before, your station has no future if it isn’t exploiting mobile in all its manifestations.
In the cases of Young and Freedom, a new owners might mean a fresh start and relief from the wracking uncertainty that comes from Chapter 11 and its aftermath. There is something to be said for stability.
With each deal, there will be an outcry from those opposed to “media consolidation” as if bigness were in and of itself a bad thing. Bigness can be a good thing. It can provide the resources and legal backing that enterprise and investigative journalism often requires, job security and perks that are disappearing from small companies.
What matters is not how big the new owner is, but who the new owner is. Is it a company that measures the value of a TV stations only in dollars and cents or one that respects the special role TV stations occupy in their communities? Is it one that is in for the long haul or one that will look to flip the group in five to seven years?
The Nexstar announcement has special significance. Four years ago, almost to the week, Nexstar and LIN Television abruptly pulled themselves off the auction block as credit markets tightened and the U.S. economy prepared to step off a cliff. Those moves slammed the door on station trading. It’s been a lean four years for brokers, lawyers and bankers aiming to make money off of station transactions.
So, perhaps the news that Nexstar is back on the market is our official notification the door is swinging open again. It’ll be interesting to see who walks through.
Harry A. Jessell is editor of TVNewsCheck. He can be reached at 973-701-1067 or mailto:[email protected]. You can read his other columns here.
Comments (5)
Sean Lubens says:
July 22, 2011 at 4:41 pm
Nexstar is a well run operation at all levels, in my opinion, the “wild card” for them has been their Fox affiliations and the posturing of Fox on retransmission fees. Over the past few weeks, Fox has changed affiliations from Nexstar stations in several markets and it can be expected to do the same with the remaining Nexstar Fox stations as their affiliation agreements lapse. While the # of weekly programming hours was not that significant, the marquee value of NFL, MLB, NASCAR et al, can not be minimized not only for the ad dollars they command but also the coattail effect they provide for other local programming, especially local news. How will the Nexstar stations be valued without Fox, even where it has duopolies in many of the markets it serves, what will their projected cash flows be valued at without Fox, etc.?
Brian Walshe says:
July 23, 2011 at 11:39 am
Mr. Jessel writes: “Sometimes, the new owners come burdened with a lot of debt they had to take on to buy the stations.”
Another reason to return to the policies of yesteryear, when prospective licensees were required to show–if I recall the rule correctly–that they could operate the station for a year without necessarily having cash flow from the station. They also had to keep the station for three years, and face a more frequent license renewal with comparative hearings on the merits of their stewardship if another applicant felt it could do better.
When the rules changed such that licenses could be bought and sold in an instant and KKR began leveraged buyouts, the BUSINESS of broadcast station ownership changed dramatically, and I’d argue it hasn’t been for the betterment of the people supposedly served, nor for the betterment of many of the investors in these companies that are overwhelmed by debt and can only shuck expenses (read employees and suppliers) when a financial storm or economic dip occurs.
We had more independent voices then, because ownership was limited to 5-5-5 and later 7-7-7. While there are more stations now than in the 60’s and 70’s, I’d argue that the number of companies owning stations has not kept pace, despite the FCC’s lip service to “increasing the number of ‘voices’ within a community.”
Liz Sidoti and Bob Lewis says:
July 25, 2011 at 9:09 am
There will not be multiple bidders for Nexstar. Too much uncertainity about the FOX affiliations. This is a good time, however, for the management team to replace its equity partner with fresh blood and allow them to increase their ownership of the company. There will be a process but Mr. Sook will emerge as the only serious bidder for is own company.
The story really needs to focus on the other companies who are walking dead. Little, if any, equity remaining in each company and too much debt. These companies–Bonton, Barrington, Newport, Gray, etc.–need to find a new owner. Also, unless and until the retransmission grab by the networks changes, much of the next several years will be owners trying only to run faster to make those payments and not really creating any additonal value for their shareholders. TV is a troubled business right now.
Joe Jaime says:
July 25, 2011 at 2:57 pm
Your last comment reads “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.” Not likley….. with private equity firms providing much of the equity….especially if the sale requires 40% equity. Equity players look for returns that exceed annual Mastercard rates. I fear 10-30% operating margins will not attrach high ((12-14x) multipiles….and stall most interest in purchasing a station unless it can become a duoply.
Bill Greep says:
July 25, 2011 at 4:05 pm
Good point GM Retired… Can you say New Vision ?