According to a new report, 21st Century Fox is evaluating requests for the company to step into Sinclair Broadcast Group’s pursuit of Tribune Media’s assets. Citing unnamed sources familiar with the situation, Bloomberg reported that some investors are urging top Fox management to intercede in Sinclair’s attempts to acquire Tribune so that Fox could potentially acquire Tribune with an alliance of other investors.
However, according to the report, Fox isn’t interested in acquiring Tribune itself, as noted publicly by Fox executives in the past. The report added that Fox may end up not doing anything at all.
The report shed additional light on the ongoing machinations in the nation’s TV broadcasting industry, which remains in the throes of heated M&A activity. Sinclair has been reportedly moving on Tribune to ink a merger with the company (though Bloomberg notes that no deal is imminent). And Bloomberg also reported that Nexstar Media Group, fresh off its own acquisition of Media General, may also make a play for Tribune.
Hanging over the situation are the FCC’s broadcast ownership rules. The rules prevent things like owning more than two television stations in the same market and owning a newspaper and a TV broadcast station in the same market. Such rules have somewhat hindered M&A in the broadcast TV arena, and the National Association of Broadcasters has urged the FCC reconsider them, calling the rules late last year “arbitrary, capricious and an abuse of discretion.”
And the FCC, under new Republican leadership, may well loosen those rules.
Thus, the stage may be set for continued M&A activity in the broadcast arena, a situation likely bolstering Fox’s potential interest in Tribune. Bloomberg named only an activist investor, Starboard Value, which owned a 4.4% stake in Tribune as of March 15, as one of the parties that had approached Fox to urge it to intervene in Sinclair’s pursuit of Tribune.
Bloomberg quoted sources who said that a matchup between Tribune and Sinclair would give Sinclair control of 28% of the Fox-affiliated channels that Fox doesn’t own directly. That situation could give Sinclair leverage over Fox in retransmission negotiations.
Fox last month reported a 35% jump in operating income for its television unit—the company’s TV segment OIBDA reached $376 million on revenues that rose 12%. Fox attributed the growth to higher sports advertising revenues, higher local political advertising spending at the television stations, higher retransmission consent revenues, higher content revenues at the Fox Broadcast Network and revenues generated by the television stations to permit the commercial use of adjacent wireless spectrum in one of our markets.