Tribune’s $2.7B Buy: More Like That Likely

With the acquisition of Local TV's 19 stations in 16 markets, Tribune’s broadcast portfolio will swell from 23 to 42 stations — 14 CW affiliates, 14 Fox affiliates, five CBS affiliates, three ABC affiliates, two NBC affiliates and four independents.

One $2.725 billion deal down, more to come for Tribune?

Peter Liguori, Tribune Co.’s president-CEO, in announcing the broadcast television-newspaper owner’s cash deal to buy 19 Local TV LLC-FoxCo. stations, left a fairly obvious trail of breadcrumbs leading to that conclusion.

“M&A is our night job,” Liguori said during a conference call with analysts following the deal’s announcement today. “You know what our day job is.”

The day job, as Liguori pointed out several times during the call, is operating the company’s stable of stations, including superstation WGN America, developing new programming and running its newspaper group.

The additional stations pushes Tribune’s reach to 50 million TV homes, or just under 44% of the 114.2 million total. Fueling speculation that more acquisitions could come, another Tribune executive said during the call that the company is still well below the FCC cap.

With the addition of the new stations, Tribune will have $3.5 billion in consolidated pro-forma revenues in the current non-political year, noted Chandler Bigelow, Tribune’s CFO, during the call. That will yield $1.1 billion in EBITDA, $500 million in free cash flow and $100 million in incremental advertising from the Local TV stations, he said.


The deal will nudge Tribune’s debt-to cash flow leverage ratio to just under three times, Bigelow said. That, coupled with access to $4.1 billion in financing commitments from a consortium of investment banks, appears to give Tribune ample capacity for more deals.

The company has been cutting jobs in the newspaper division, including layoffs over the weekend at the Los Angeles Times, in what’s widely viewed as a precursor to selling all or part of the print division. The conservative political activist Koch brothers reportedly are potential buyers.

After emerging from a prolonged bankruptcy at the end of 2012 and starting this year with new management, including Liquori in the top spot and television veteran Larry Wert heading its local broadcasting division, Tribune clearly is roaring back into the thick of the broadcasting business.

With the acquisition of Local TV’s 19 stations in 16 markets, Tribune’s broadcast portfolio will swell from 23 to 42 stations — 14 CW affiliates, 14 Fox affiliates, five CBS affiliates, three ABC affiliates, two NBC affiliates and four independents.

Through the Local TV acquisition, Tribune becomes not only the largest Fox and CW affiliate owner, but the largest commercial station owner with 42, including 14 in top-20 markets. Those stations include news-producing independents in New York, Chicago, and Los Angeles.

The deal also pushes Tribune’s reach to more than 50 million U.S. television homes, according to Liguori. That works out to just under 44% of the total universe of 114.2 million U.S. television households.

With the deal, Tribune jumps from No. 8 to No. 4 in the TVNewsCheck-BIA/Kelsey Top 30 Station Groups list with estimated 2012 spot revenue of $1.4 billion.

The acquisition eclipses the previous 2013 M&A record of $2.5 billion achieved in Gannett’s acquisition of Belo. But there’s likely a good deal more activity to come, Marci Ryvicker, senior analyst at Wells Fargo Securities, wrote in a morning research update.

Noting there’s still about $4 billion in “low-hanging fruit” remaining (station groups with private equity owners or coming out of bankruptcy), Ryvicker wrote: “We continue to see the M&A pipeline as robust and anticipate (Sinclair) and (Nexstar) being participants over the next 12-18 months.”

Local TV is owned by Oak Hill Partners, a private equity firm. It announced in March its intention to sell the group, which it had assembled primarily by buying nine stations from the New York Times Co. for $575 million in 2007 and eight stations from Fox for approximately $1.1 billion in 2008.

For a time, Local TV and the Tribune-owned stations were under the same management, headed by former Tribune CEO Randy Michaels. Michaels, widely known for his controversial behavior, was asked to resign from his position in October of 2010. Bobby Lawrence, president of Local TV, and Pam Taylor, COO, subsequently assumed more autonomous leadership of the group.

Tribune also owns cable channel WGN America, Tribune Studios, Tribune Digital Ventures as well as the eight major-market newspapers.

Tribune anticipates the combination with Local TV will generate more than $100 million in annual run-rate synergies within five years. Three-quarters or more of that will come from new revenues, including retransmission fees, which will climb from roughly 10% of Tribune’s annual revenues currently to as much as 20%, according to Bigelow.

One of the key synergies: Tribune will pay no reverse compensation through 2018 to Fox for the seven Fox stations acquired in the deal.

Given those synergies and a step-up in the tax basis of the acquired assets, Tribune said it is paying seven times 2011-12 average EBITDA. The seller multiple works out to 9.4X Local TV’s blended 2011-12 EBITDA, Bigelow said.

Tribune will finance the transaction through a combination of debt financing and cash on hand.

Because most of Local TV’s stations are ranked No. 1 or No. 2 in revenue in their markets, the transaction will generate significant free cash flow and be immediately accretive to Tribune’s earnings, Tribune said.

“Since joining Tribune in early 2013, we have been setting the strategic foundation to transform Tribune and help chart the path forward — building our multimedia capabilities and asset portfolio to become the country’s leading independent content creator and distributor,” Liguori said in a statement.

“This is a transformational acquisition for Tribune. It makes us the No. 1 local TV affiliate group in America, expands the distribution platform for our high-quality video content, and extends the reach of our digital products to new audiences across the country,” he added.

Jonathan Friesel and Benjamin Diesbach, partners at Oak Hill Capital, jointly said: “We thank Bobby, president and COO Pam Taylor, and the entire Local TV family for their outstanding dedication and performance.”

In his statement, Bobby Lawrence said: “Our cultures and operating philosophies are very similar, and we share a strong commitment to news and local programming excellence. My management team will dearly miss working with some of the most talented and dedicated people in broadcasting, but we know we leave our employees in good hands. I am grateful to our partners at Oak Hill Capital, who acquired the finest stations in the industry and helped us build this great company.”

Tribune has received financing commitments of up to $4.1 billion from JPMorgan Chase, BofA Merrill Lynch, Citigroup, Deutsche Bank and Credit Suisse, including a new $300 million revolving credit facility and the capacity to allow Tribune to refinance its existing debt.

Guggenheim Securities acted as financial adviser to Tribune, and Debevoise & Plimpton and Covington & Burling acted as legal advisers to Tribune on the transaction. Moelis & Co. LLC; Wells Fargo Securities LLC; and Deutsche Bank Securities Inc. acted as financial advisers to Local TV, and Dow Lohnes PLLC acted as legal advisers to Local TV.

Merged Tribune-Local TV LLC Stations

(Local TV stations in boldface)

Station DMA Rank Affiliation
WPIX New York 1 CW
KTLA Los Angeles 2 CW
WGN Chicago 3 CW
WPHL Philadelphia 4 MNT
KDAF Dallas 5 CW
WDCW Washington 8 CW
KIAH Houston 10 CW
KCPQ Seattle 12 Fox
KZJO Seattle 12 MNT
WSFL Miami 16 CW
KWGN Denver 17 CW
KDVR Denver 17 Fox
WJW Cleveland 18 Fox
KTXL Sacramento, CA 20 Fox
KTVI St. Louis 21 Fox
KPLR St. Louis 21 CW
KRCW Portland, OR 22 CW
WXIN Indianapolis 26 Fox
WTTV Indianapolis 26 CW
KSWB San Diego 28 Fox
WTIC Hartford, CT 30 Fox
WCCT Hartford, CT 30 CW
WDAF Kansas City 31 Fox
KSTU Salt Lake City 33 Fox
WITI Milwaukee 34 Fox
WXMI Grand Rapids, MI 39 Fox
KFOR Oklahoma City 41 NBC
KAUT Oklahoma City 41 Ind
WPMT Harrisburg, PA 43 MNT
WTKR Norfolk, VA
44 CBS
WGNT Norfolk, VA 44 CW
WGHP Greensboro, NC 46 Fox
WREG Memphis 49 CBS
WGNO New Orleans 51 ABC
WNOL New Orleans 51 CW
WNEP Wilkes-Barre, PA 54 ABC
WTVR Richmond, VA 57 CBS
WHO Des Moines, IA 72 NBC
WHNT Huntsville, AL
79 CBS
WQAD Moline, IL
99 ABC
KFSM Fort Smith, AR
101 CBS
KXNW Fort Smith 101 MNT

Comments (19)

Leave a Reply

Gregg Palermo says:

July 1, 2013 at 9:57 am

Smooth move. I saw this comment on another site: Getting out of the newspaper business to get into the broadcast business is a lot like getting out of the buggy whip business to get into the shoe repair business. But Tribune is moving from #4 to #19 on the list of the 40 things that won’t exist in 2020, according to Erik Qualman (http://www.socialnomics.net/2012/01/18/40-items-tech-will-kill-this-digital-decade/)

Jason Crundwell says:

July 1, 2013 at 10:20 am

This is very, very bad news for those of us in the trenches at Tribune. The idiots who brought this company to its knees are now officially running things. Hundemer with his third party company developing poorly-designed systems he then REQUIRES Trib stations to purchase (making him richer, of course, and sealing out competitors) and Charlier RUINING news. I’m out. To hell with this.

    Shelley Clark says:

    July 1, 2013 at 1:05 pm

    Hundemer is an excellent engineer and Tribune operates great stations. Even in bankruptcy LA, NY, Chicago all stayed solid and several markets thrived.

    Dietrich von Behren says:

    July 1, 2013 at 4:20 pm

    @ChoppedLiver – your name is appropriate….because you obviously do not have the chops to be in TV. Probably good that you’re leaving.

Brian Bussey says:

July 1, 2013 at 10:58 am

and wall street continues to get rich. hey rust belt, the demise of broadcast has be forecasted every year since the vcr was invented. Outsiders just dont get it. Bring your cute little cookie based wap sites to my next cattle call and I will crush you.

mark wienkes says:

July 1, 2013 at 11:33 am

How can a ‘Local” station be local it has no requirement to meaningfully serve it’s licensed community…..bring back limits on the number of stations a company can own, no let’s improve that, .how about requiring a stations owner to live in the coverage area of their station?

Maria Black says:

July 1, 2013 at 12:36 pm

I expected someone else to buy up Local TV, like LIN. However, once I read this I remembered all the LSAs and other service agreements between Tribune and Local TV stations and it all made sense. Well, as much sense as a move like this can make. We’ve been waiting to hear if they are spinning off the newspaper bit, or maybe WGN, and instead, they just go buy some stations. If they are aiming to obfuscate, mission accomplished.

    Just Fine says:

    July 1, 2013 at 2:45 pm

    If LIN had bought Local TV, that would have been quite problematic for my part of the world. They would have have controlled the NBC, Fox, CBS, and CW affiliates. Interesting on paper, but a nightmare to manage. But still, between Gannett buying Belo and Tribune buying Local, seems like the players are getting smaller and smaller. Don’t know if that’s a good thing, but living in a market that’s affected by both major purchases, I’ll wait and see what happens.

Shenee Howard says:

July 1, 2013 at 4:07 pm

Whew, it was NOT Sinclair!

antonio berretta says:

July 1, 2013 at 4:32 pm

Hey Rustbelt Alumnus. Is this your full time job commenting on these pages???

Joanne McDonald says:

July 1, 2013 at 5:01 pm

Tribune would turn KDVR into a CW station and could sell it directly to CBS as a owned and operated station and form a duopoly with KCNC while Tribune keeps KWGN and turns into a FOX station. Tribune would turn KTVI into a ABC station and KPLR getting turn into a FOX station and could sell it to either FOX as a owned and operated station or Nexstar owning them and running them a FOX affiliate of their own with KDNL turning into a CW station under Sinclair ownership and control. Tribune would turn WGHP into a ABC station with WXLV turning into a FOX station under Sinclair ownership and control while WGHP could enter a JSA/LMA/SSA with soon to be Lockwood owned WCWG as a partner for launching newscasts. WHNT could enter a JSA/LMA/SSA with Lockwood owned WHDF as a partner for launching newscasts.

Disney could fully buy WJLA from Allbritton and turn it into a full ABC O&O station in Washington DC. I would be okay with Hearst getting KTUL , KATV, WCIV, and WSET with Nexstar getting WHTM and Sinclair transferring the license of WLYH to Cunningham/Deerfield and continue to fully owned WHP, and with Sinclair getting the combined WBMA LD/WJSU/WCFT with the intent of using the the combined WBMA LD/WJSU/WCFT to program FOX on it’s DT1 channel and MYNET on it’s DT2 channel while WABM continues to program MYNET on it’s DT1 channel and add FOX on it’s DT2 channel. Sinclair keeps the CW affiliation on WTTO and WDBB. Sinclair could transfer the license of WTTO and WDBB to Cunningham and WABM to Deerfield while Sinclair fully owns the combined WBMA LD/WJSU/WCFT combo or Raycom could buy the combined WBMA LD/WJSU/WCFT combo and place it under the control of American Spirit Media with the intent to move the FOX affiliation there on it’s DT1 channel with WBRC rejoining the ABC Network on it’s DT1 channel. The combined WBMA LD/WJSU/WCFT combo would air WBRC on it’s DT2 channel or all of it’s programming 24/7 with ABC is transferred and switched onto WBRC while WBRC would air the WBMA LD/WJSU/WCFT combo on it’s DT2 channel or all of it’s programming 24/7 with FOX is transferred and switched onto the WBMA LD/WJSU/WCFT combo.

My idea of KWGN and KPLR being FOX affiliates, KTVI and WGHP being ABC affiliates, and KDVR being a CW affiliate would have the combined Tribune and Local TV LLC stations having 13 CW affiliates, 13 Fox affiliates, five CBS affiliates, five ABC affiliates, two NBC affiliates and four independents.

    Stephanie Harrison says:

    July 1, 2013 at 6:04 pm

    Could you expand on this some more??

    Sean Smith says:

    December 31, 2013 at 9:06 pm

    NO…NO!!!!! Do not ask him to expand further. He doesn’t know what he’s talking about.

Susan Hardee says:

July 1, 2013 at 5:52 pm

Do you have this rant ready to paste on every website in the nation? Please spare us, seeing you clearly have no idea what you’re talking about in regards to several of the stations and markets you mention. Most glaring example is KTVI. It is an enormously profitable Fox affil, and one of the gems of the Local TV purchase. It used to be ABC. No one is turning it back. Also, when KTVI and KPLR were merged into the same building just 4 years ago, I don’t think anyone is splitting them up. .

    Joanne McDonald says:

    July 1, 2013 at 6:26 pm

    You forget that Gannett is buying Belo with KSDK being fully owned by them and KMOV going to be controlled by Jack Sandler with KSDK being #1 and KMOV being #2 and Tribune buying Local TV LLC with KTVI being #3 and KPLR being #4. KDNL is still owned by Sinclair and is still #5. WRBU is still owned by Roberts Broadcasting and is still #6. You should read this article about the Gannett/Belo merger: http://seattletimes.com/html/opinion/2021291066_craigaaronopedxml.html
    Both the Gannett/Belo merger and the Tribune/Local TV LLC merger will come with concessions to both these mergers to address anticompetitive issues and for competitive balance. I would rather see Gannett spinning off KASW, KMSB/KTTU, and KMOV to Meredith and combined the operations of KASW with KPHO, and spinning off KTVK, and WHAS to Scripps and combined the operations of KTVK with KNXV with ABC moving to KTVK and KNXV becomes independent for competitive reasons and a very true win-win situation for Gannett, Meredith, and Scripps in Phoenix. Tribune would turn KTVI into a ABC station and KPLR getting turn into a FOX station and could sell it to either FOX as a owned and operated station or Nexstar owning it and running it as a FOX affiliate of their own with KDNL turning into a CW station under Sinclair ownership and control for competitive reasons and a very true win-win situation in Saint Louis. If KTVI remained with FOX and KPLR remained with CW, KDNL would not survive and ABC would pressure Tribune to air ABC on both KTVI and WGHP as the last resort to help improve ABC service to their respective TV DMA markets and as a condition to the merger.

mike brown says:

July 2, 2013 at 6:27 am

So who gets KRON, Fox or Tribune? Asked 5 years ago, now oddly relevant again today.

KOFY and WMYD would be attractive those two companies as well when Granite goes on the market.

Jeff Hovendon says:

July 2, 2013 at 3:25 pm

Is anybody else sick of reading what midget James Cieloha would “favor” or “be okay” with about what the giants are doing? I don’t know about you, but I kinda feel like David Smith and Perry Sook really don’t care what some guy in a bathrobe at the computer in his basement all day would “favor” they do.

    Bill Vernon says:

    July 22, 2013 at 5:36 pm

    Apparently I am getting really really tired of his schematic bullsh*t! Apparently he does not know how to stop and someday someone is going to report him!

Sean Smith says:

December 31, 2013 at 9:08 pm

He’s been like this for several weeks. He deliberately posts stupid posts because he doesn’t know any better. He should definitely be reported.