Sinclair Broadcast Group’s pursuit of Tribune Media’s assets appears to be moving fast as the two companies are reportedly near a deal for all of Tribune’s stations and cable networks.
The New York Post is citing several sources who say the companies are discussing a price of about $40 to $41 per share for a deal that would include all 42 Tribune TV stations and Tribune’s stakes in the Food Network and WGN.
But Sinclair may only be willing to buy all of Tribune Media if it has to, and could look to sell off Tribune real estate holdings and some stations after it completes the potential merger.
Jefferies analyst John Janedis said an outright sale of Tribune to Sinclair was less likely than Tribune agreeing to sell off certain assets.
“While there are a lot of moving pieces, we think an outright sale to SBGI as a potential option in the press carries risk. While the FCC will likely reinstate the UHF discount later this month, we also think it will ultimately be eliminated in late '17 & uncertainty around grandfathering deals in the interim and the cap could be an issue,” wrote Janedis in a research note.
News of a potential deal between Sinclair and Tribune was originally reported earlier this month by Reuters and now it looks as if the two parties are simply waiting for FCC Chairman Ajit Pai to change the ownership rules for broadcasters that cap nationwide station reach at 39%.
According to Variety, Pai said the current media ownership rules are “antiquated” and that his agency is taking a close look at them. While scaling back restrictions on TV station ownership is something the FCC has been discussing for a while now, Pai cautioned that the FCC has made no “firm determinations” regarding the rules.
One particular rule in question is the UHF discount.
Last year, the FCC changed the UHF discount governing ownership rules for broadcast stations so that UHF stations would now have to count 100% of their reach toward the cap, instead of the previous 50%. Broadcasters like CBS have urged the FCC to reinstate the UHF discount before making any further reforms on the ownership rules.
Barclays analyst Kannan Venkateshwar wrote in a research note that broadcast regulations may not shift to the degree many are hoping, and that UHF discounts may not be reinstituted if media ownership rules are changes.
But broadcasters like Nexstar feel that the FCC—under the guidance of Pai, a fan of light-touch regulation—are anticipating a shift in the rules.
“Well, we do anticipate there will be deregulatory activity … as we roll through the year. Some things will happen sooner than others. We're optimistic that the UHF discount will be reinstated and then an NPRM issued to discuss all ownership rules, both local and national that the FCC I think will work through,” said Sook according to a Seeking Alpha transcript.