Despite rumors of a Sinclair tie-up, Tribune Media is unlikely to sell off the whole company, according to Jefferies analyst John Janedis.
Janedis said that Tribune Media’s CEO search—following the imminent departure of chief exec Peter Liguori—creates somewhat of a wild card, but he thinks there is greater likelihood of individual station sales instead of a sale of the entire company.
“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.
Reuters reported earlier this week that Sinclair and Tribune Media were engaged in preliminary discussions about a possible merger or acquisition—which could include the sale of individual Tribune stations—but that those talks likely hinged on whether the FCC would revise television station ownership rules.
In particular to the rules, many in the broadcast industry are expecting or lobbying the FCC to reinstate 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%.
Of course, divesting parts of its business would be in line with Tribune’s recent strategy. The company most recently sold its metadata unit Gracenote to Nielsen and before that sold off a number of its real estate holdings.
As Janedis points out, those sales have been a positive for the company.
“Since 2015, TRCO has recognized more than $1B in proceeds from the sale of real estate and Gracenote, which has driven a significant return of capital (500M special dividend, $75M share repurchases in 4Q, $400M in debt paydown),” Janedis wrote.
Of course, with cost controls kicking in, Tribune may want to see how 2017 goes before committing to any merger or acquisition.
“Overall, the outlook for '17 was largely in line with our prior expectations, with better cost controls at corporate / WGNA offsetting slightly lower than expected revenue growth in TV & entertainment,” Janedis wrote.